Public-Private Partnership Arbitration in Turkey: Infrastructure and Concession Disputes

Introduction

Public-private partnership projects are commonly used to deliver infrastructure and public services that require substantial capital, specialised technology and long-term operation. In Türkiye, PPP structures have been used in sectors such as transportation, healthcare, energy, airports, ports, tunnels, bridges, roads, rail systems, water infrastructure and other large-scale public facilities.

A typical PPP project may require the private partner to design, finance, construct, maintain and operate an infrastructure asset for a fixed period. The project company may obtain financing from international banks, provide security over project revenues and shares, engage an engineering, procurement and construction contractor and appoint several service providers. The public authority may grant land rights, undertake payment obligations, provide demand guarantees or agree to purchase particular services.

Because PPP agreements commonly last for decades, disputes may arise from changes that could not be predicted fully at the date of signing. These may include inflation, currency fluctuations, legislative changes, permit delays, construction problems, demand shortfalls, public-authority instructions, service-payment deductions, refinancing gains, force majeure and early termination.

For this reason, dispute resolution is one of the most important elements of a Turkish PPP project. Public-private partnership arbitration in Turkey may provide a neutral and specialist forum for resolving infrastructure and concession disputes. However, the validity and scope of arbitration depend on the statutory basis of the project, the legal character of the contract, the existence of a foreign element and the wording of the arbitration agreement.

The Turkish Constitution expressly permits national or international arbitration in public-service concession agreements. It also authorises legislation to determine which public investments and services may be performed or transferred to private persons through private-law contracts.

This guide examines:

• The constitutional basis of PPP arbitration;
• Private-law PPP contracts and public-service concessions;
• Build-operate-transfer projects;
• Healthcare PPP agreements;
• Public guarantees and debt assumption;
• Construction and operating-period disputes;
• Change in law and force majeure;
• Demand and revenue guarantees;
• Termination and compensation;
• Lender rights and direct agreements;
• Contract arbitration and investment treaty arbitration;
• Interim measures;
• Recognition and enforcement of arbitral awards.

What Is a Public-Private Partnership?

A public-private partnership is a long-term arrangement under which a public authority and a private-sector entity cooperate in delivering infrastructure or public services.

The expression PPP does not describe a single standard contract. The project structure depends on:

• The relevant sector;
• The statutory authorisation;
• The source of project revenue;
• Ownership of the infrastructure;
• Allocation of construction and demand risk;
• Public payment obligations;
• The transfer arrangements at the end of the term.

Common structures may include:

• Build-operate-transfer;
• Build-lease-transfer;
• Build-operate;
• Transfer of operating rights;
• Long-term concession arrangements;
• Availability-payment models;
• Service-based PPP arrangements.

In a build-operate-transfer project, the private partner generally finances and constructs the facility, operates it for the agreed period and transfers it to the public authority at the end of the contract.

In an availability-payment structure, the private partner may receive regular payments from the administration for making the facility and contractually defined services available, subject to performance deductions.

In a user-funded concession, project revenue may derive primarily from tolls, tariffs, passenger charges, port charges or other payments made by service users.

Constitutional Basis of PPP and Concession Arbitration

The constitutional framework is essential because Turkish PPP projects may involve either private-law contracts or public-service concession agreements.

Article 47 of the Turkish Constitution

Article 47 provides that legislation determines which investments and services carried out by the state, state economic enterprises and other public legal entities may be performed or transferred to natural or legal persons through private-law contracts.

This provision allows Parliament to classify particular public projects as subject to private-law contracting.

Accordingly, the involvement of a public authority does not automatically mean that every PPP contract is an administrative contract. The relevant sector law may expressly state that the implementation agreement is governed by private law.

Article 125 of the Turkish Constitution

Article 125 establishes that judicial review is available against administrative acts and actions. It also states that disputes arising from public-service concession agreements may be submitted to national or international arbitration. International arbitration may be chosen only for disputes containing a foreign element.

The constitutional rule therefore recognises two possible paths for concession disputes:

• National arbitration;
• International arbitration where a qualifying foreign element exists.

The arbitration clause must still be included in the concession agreement or established through a separate valid arbitration agreement. The constitutional provision permits arbitration but does not itself submit every concession dispute automatically to arbitration.

Private-Law PPP Contracts and Concession Agreements

The legal character of the project agreement affects:

• The applicable substantive law;
• The authority of administrative courts;
• The application of arbitration legislation;
• Available remedies;
• The treatment of unilateral administrative measures;
• The annulment and enforcement framework.

Private-law PPP contracts

Where legislation expressly classifies the agreement as a private-law contract, contractual disputes are generally treated as private-law matters.

Examples may include disputes over:

• Payment;
• Delay;
• Defects;
• Performance deductions;
• Contractual compensation;
• Termination;
• Handback obligations.

The involvement of a ministry, municipality or other public entity does not remove the contractual character assigned by legislation.

Public-service concession agreements

A concession agreement may authorise a private party to perform or operate a public service while bearing substantial operational or commercial responsibilities.

Where a concession agreement remains an administrative contract, the parties must assess the special constitutional and statutory rules governing concession arbitration.

A contractual dispute should also be distinguished from a challenge to a separate administrative act. For example, a tribunal may have jurisdiction over compensation arising from the administration’s breach of a concession agreement. It may not necessarily have authority to annul a generally applicable regulation, public licence decision or administrative sanction.

Law No. 4501 and Arbitration of Concession Disputes

Law No. 4501 establishes principles governing arbitration clauses in public-service concession agreements.

The law defines a foreign element by reference to circumstances such as:

• The involvement of a foreign-origin shareholder in the project company;
• The need for foreign-sourced capital;
• The need for foreign credit or guarantee agreements to implement the project.

Where the concession agreement contains a foreign element, the parties may agree to arbitration:

• Seated in Türkiye;
• Seated in another country;
• Administered by an international arbitration institution with its own procedural rules.

Law No. 4501 also requires the parties to regulate the arbitration mechanism in detail. Relevant matters include the disputes covered, procedural rules, seat, selection and qualifications of arbitrators, language, applicable substantive law, evidence, experts, notification periods, arbitration duration, arbitrator fees and costs.

The Turkish International Arbitration Law expressly preserves the special foreign-element framework created by Law No. 4501 for public-service concession agreements.

A concession arbitration clause should therefore not be copied mechanically from an ordinary supply or construction agreement. It must be coordinated with:

• The statutory approval process;
• The concession agreement’s entry-into-force requirements;
• The specific foreign element;
• The authority of the public entity;
• The procedural rules selected by the parties.

Build-Operate-Transfer Projects under Law No. 3996

Law No. 3996 is one of the principal legislative frameworks governing build-operate-transfer projects in Türkiye.

Its scope covers various forms of infrastructure, including bridges, tunnels, dams, water systems, treatment plants, communication facilities, energy projects, roads, railways, logistics facilities, parking facilities, airports and ports, subject to the applicable statutory conditions.

Private-law character

Article 5 of Law No. 3996 states that the agreement concluded between the authorised administration and the project company or foreign company is governed by private-law provisions.

This classification is highly relevant to arbitration. Contractual disputes arising from a Law No. 3996 implementation agreement may be referred to arbitration where a valid arbitration clause exists and the applicable arbitration requirements are satisfied.

Contract duration

The duration of the project is determined by considering matters such as:

• Investment cost;
• Profit;
• Repayment period of project financing;
• Nature of the project;
• Amount of equity;
• Operating principles.

The published statutory text provides that the contract term may not exceed 49 years.

Responsibility of the project company

The project company is responsible for designing, financing, constructing and operating the project within the agreed period. The contract may also regulate compensation for losses suffered by the administration when the company fails to perform its obligations.

The agreement may contain provisions concerning default interest where payments owed by the public authority are delayed.

Demand guarantees

Law No. 3996 permits the administration to grant demand guarantees for goods and services produced by the project company. Where demand exceeds the guaranteed level, the implementation agreement must regulate the corresponding revenue-sharing mechanism.

Demand-guarantee disputes may involve:

• Traffic counts;
• Passenger numbers;
• Consumption levels;
• Guaranteed service quantities;
• Calculation periods;
• Foreign exchange conversion;
• Excluded users;
• Revenue-sharing above the guarantee;
• Delayed public payments.

Transfer at the end of the term

At the end of the agreement, the investment and services must transfer automatically and without charge to the administration, free from liabilities and in a maintained, operational and usable condition.

This handback obligation can create complex technical disputes near the end of the project term.

Healthcare PPPs under Law No. 6428

Law No. 6428 regulates healthcare facilities developed under the public-private partnership model.

The statute provides for projects to be conducted under private-law provisions and allows facilities to be developed on Treasury-owned land through an independent and permanent right of superficies. Excluding the fixed investment period, the statutory project period may not exceed 30 years.

The private partner may be responsible for:

• Construction;
• Financing;
• Maintenance;
• Repair;
• Facility-management services;
• High-technology services;
• Other contractually defined non-clinical services.

Governing law and arbitration

The original statutory text provides that Turkish law applies to legal disputes arising during performance of the agreement and identifies Turkish courts as the default forum. It also permits the parties to agree that disputes will be resolved under the Turkish International Arbitration Law, provided Turkish law governs the merits.

A 2015 legislative amendment removed the original statutory wording requiring the arbitration case to be heard in Türkiye. The amendment was intended to allow the arbitration seat to be located outside Türkiye while maintaining Turkish substantive law for the dispute.

Accordingly, a healthcare PPP clause must be reviewed according to:

• The current form of Law No. 6428;
• The executed project agreement;
• The chosen seat;
• The selected arbitration rules;
• The mandatory application of Turkish substantive law.

Payment disputes

Law No. 6428 distinguishes between payments concerning use of the facility and payments for specified services. The statutory framework also addresses indexation, foreign currency financing adjustments and the sharing of refinancing benefits.

Disputes may arise over:

• Availability payments;
• Service payments;
• Inflation adjustment;
• Foreign exchange adjustment;
• Performance deductions;
• Market-testing results;
• Refinancing gains;
• Commencement of payment;
• Partial acceptance;
• Delayed public payment.

Contract Arbitration and Investment Arbitration

PPP disputes may generate both contractual and investment-treaty issues. These two forms of arbitration must be distinguished carefully.

Contractual PPP arbitration

Contractual arbitration arises from the arbitration clause in the project agreement.

The claimant may allege:

• Breach of payment obligations;
• Failure to provide land;
• Improper performance deductions;
• Breach of a demand guarantee;
• Unlawful contractual termination;
• Failure to approve construction stages;
• Failure to comply with a compensation mechanism.

The tribunal’s jurisdiction is based on the consent contained in the PPP contract.

Investment treaty arbitration

A foreign shareholder or project investor may, in some circumstances, rely on a bilateral investment treaty or another investment-protection instrument.

Türkiye maintains a broad network of bilateral investment treaties that may contain protections such as fair and equitable treatment, protection against expropriation, national treatment, transfer rights and investor-state dispute settlement. The applicable treaty must be examined individually because definitions, procedural requirements and substantive protections vary.

Türkiye is also listed within the ICSID member-state system. ICSID jurisdiction nevertheless requires separate written consent and satisfaction of the Convention’s jurisdictional requirements; membership alone does not amount to consent to arbitrate every investment dispute.

A breach of a PPP contract is not automatically a treaty breach.

A treaty claimant must establish matters such as:

• Protected investor nationality;
• Existence of a protected investment;
• State consent to arbitration;
• Attribution of conduct to the state;
• Breach of a treaty standard;
• Causation;
• Recoverable loss.

Contract and treaty claims may overlap factually but remain legally distinct.

Common PPP and Infrastructure Disputes

1. Site delivery and land rights

The public authority may be required to provide the project site, complete expropriation or establish required rights over public land.

Disputes may concern:

• Delayed site delivery;
• Undisclosed underground conditions;
• Existing occupants;
• Archaeological findings;
• Utility relocation;
• Zoning restrictions;
• Incomplete expropriation;
• Access-road delays;
• Environmental restrictions.

The project company may claim an extension of time, additional cost or compensation. The authority may argue that the private partner accepted the site risk or failed to conduct sufficient due diligence.

The agreement should define which party bears:

• Land-availability risk;
• Ground-condition risk;
• Expropriation risk;
• Utility risk;
• Archaeological risk;
• Permit risk.

2. Design and construction delays

PPP construction disputes may involve:

• Late approvals;
• Design changes;
• Employer requirements;
• Contractor default;
• Supply-chain disruption;
• Inflation;
• labour shortages;
• Interface problems;
• Delayed permits;
• Force majeure.

The project company may have entered into a back-to-back EPC agreement. However, the public authority is not automatically bound by findings made in an arbitration between the project company and EPC contractor.

The parties should coordinate dispute provisions across:

• The implementation agreement;
• EPC contract;
• Operation and maintenance agreement;
• Direct agreements;
• Financing documents.

3. Completion and acceptance

Public payments commonly begin only after completion, partial completion or commencement of services.

Disputes may arise over:

• Whether completion criteria were met;
• Defects preventing acceptance;
• Testing and commissioning;
• Independent engineer certificates;
• Partial acceptance;
• Punch-list items;
• Administrative delay in approval;
• Commencement of availability payments.

The agreement should provide objective acceptance tests and prevent either party from withholding approval arbitrarily.

4. Performance deductions

Availability-based projects frequently permit deductions when the facility or service fails to satisfy contractual performance standards.

Deductions may concern:

• Unavailable areas;
• Equipment failure;
• Maintenance;
• Cleaning;
• Security;
• Catering;
• Information technology;
• Energy performance;
• Response times;
• Safety requirements.

Disputes may concern:

• Measurement methodology;
• Double deductions;
• Grace periods;
• Repeated failures;
• Service points;
• Excused events;
• Caps;
• Whether deductions are the exclusive remedy.

The tribunal may require extensive operational records and expert analysis.

5. Demand and revenue guarantees

Demand guarantees are intended to allocate part of the usage risk to the public side.

A guarantee may be based on:

• Vehicle passages;
• Passenger numbers;
• Patient or service quantities;
• Water consumption;
• Cargo volume;
• Energy purchases;
• Other measurable units.

The parties may disagree over the definition of a qualifying user, measurement system, currency conversion, indexing or revenue-sharing above guaranteed demand.

The implementation agreement should state whether compensation is:

• A contractual payment obligation;
• A shortfall payment;
• A revenue guarantee;
• A public purchase commitment;
• Subject to deductions or set-off.

6. Change in law

A change in legislation or administrative practice may increase project costs or reduce revenue.

Relevant changes may concern:

• Tax;
• Environmental law;
• labour law;
• Technical standards;
• Import restrictions;
• Licensing;
• Health and safety;
• Currency regulation;
• Service requirements;
• Tariff regulation.

A change-in-law clause should define:

• General changes;
• Discriminatory changes;
• Project-specific changes;
• Foreseeable changes;
• Changes already announced before signing;
• Relief through payment, tariff adjustment or time extension;
• Thresholds and mitigation obligations.

Not every legislative change automatically entitles the private partner to full compensation. The contract must allocate the relevant regulatory risk.

7. Force majeure

Force majeure may include events outside the affected party’s control that prevent or materially delay performance.

Possible events include:

• Earthquake;
• Flood;
• war;
• terrorism;
• epidemic;
• nationwide strike;
• embargo;
• natural disaster;
• exceptional public restrictions.

The clause should distinguish between:

• Force majeure;
• Relief events;
• compensation events;
• change in law;
• political force majeure.

Possible remedies may include:

• Suspension;
• Extension of time;
• Cost sharing;
• Continued payment;
• Long-stop termination;
• Compensation on termination.

The affected party should comply with notice, mitigation and evidence requirements.

8. Public-authority instructions and sovereign acts

The same public body may act both as contractual counterparty and as an administrative authority.

A dispute may therefore require differentiation between:

• A contractual instruction issued under the PPP agreement;
• A regulatory decision made under public law;
• A generally applicable legislative measure;
• Conduct by another state body;
• A discretionary sovereign act.

The arbitral tribunal’s jurisdiction may extend to the contractual consequences of the conduct without necessarily extending to annulment of the underlying administrative act.

The requested relief should be drafted accordingly. A monetary compensation claim may be arbitrable even where cancellation of the regulatory act must be sought before an administrative court.

9. Refinancing disputes

A successful PPP project may refinance its original debt on more favourable terms.

The public authority may be entitled to a share of the refinancing gain.

Disputes may concern:

• The definition of refinancing;
• Debt restructuring;
• Derivative transactions;
• Changes in shareholder loans;
• Calculation of the benefit;
• Transaction costs;
• Risk-adjusted savings;
• Required public approval;
• Distribution of gains.

Law No. 6428 expressly provides for equal sharing of reductions in project debt generated through refinancing or debt restructuring, with the result reflected in the usage payment under the statutory contractual framework.

10. Early termination

Early termination is one of the most financially significant PPP events.

Termination may result from:

• Project-company default;
• Public-authority default;
• Prolonged force majeure;
• Corruption;
• insolvency;
• Failure to achieve completion;
• Repeated performance failure;
• Unlawful transfer;
• Failure to maintain financing.

The agreement should define:

• Termination notice;
• Cure periods;
• Lender step-in rights;
• Valuation date;
• Compensation formula;
• Treatment of senior debt;
• Shareholder equity;
• Break costs;
• hedging termination costs;
• unpaid public amounts;
• asset transfer;
• outstanding subcontractor liabilities.

The compensation formula should differ according to the reason for termination. A project-company default should not necessarily produce the same payment as termination caused by the administration.

Public Guarantees and Debt Assumption

Project lenders commonly require protection against early termination.

Turkish legislation permits debt-assumption mechanisms for qualifying PPP projects, subject to statutory conditions, approvals and the relevant debt-assumption agreement.

The statutory framework may allow certain external financing obligations to be assumed when the PPP agreement terminates early and the public authority takes over the project. The scope may include qualifying financing liabilities and, depending on the applicable framework, related derivative obligations.

Debt assumption should not be confused with a general state guarantee of every project obligation.

The parties must examine:

• Whether the project qualifies;
• Which financing is covered;
• Whether assumption is full or partial;
• Conditions precedent;
• Required approvals;
• Excluded liabilities;
• Treatment of future undrawn facilities;
• Hedging liabilities;
• Consequences of project-company fault.

The financing agreement, implementation agreement and debt-assumption documentation must be consistent.

Lender Step-In Rights and Direct Agreements

Lenders may require a direct agreement with the public authority.

A direct agreement may provide:

• Notice before termination;
• A cure period for lenders;
• Temporary transfer of project control;
• Appointment of a substitute operator;
• Replacement of the project company;
• Restrictions on amendments;
• Recognition of project security;
• Continued public payments.

Step-in rights are intended to preserve the project and avoid immediate termination.

Disputes may arise over:

• Whether a default notice was valid;
• Whether the lender exercised step-in rights on time;
• Qualification of the substitute entity;
• Duration of the step-in period;
• Public-authority approval;
• Responsibility for existing defaults.

The direct agreement should contain a dispute resolution clause compatible with the implementation agreement. Lenders are not automatically bound by the project agreement’s arbitration clause merely because they financed the project.

Interim Measures in PPP Arbitration

PPP disputes may require urgent relief before the full tribunal is constituted.

The project company may seek to prevent:

• Immediate termination;
• Calling of performance security;
• Suspension of public payments;
• Transfer of the project;
• Destruction of project records;
• Irreversible interference with project assets.

The administration may seek to:

• Preserve essential public services;
• Secure operational records;
• Prevent disposal of assets;
• Protect confidential or security-sensitive information;
• Ensure continued maintenance;
• Preserve evidence of defects.

Interim measures in PPP disputes require particular caution. An arbitral tribunal should not issue orders that unlawfully remove statutory powers from a public authority or bind public bodies and third parties that did not consent to arbitration.

Court assistance may be required where the measure:

• Requires coercive execution;
• Concerns a public registry;
• Affects a non-signatory;
• Requires attachment;
• Must be granted without prior notice;
• Concerns an administrative decision outside the tribunal’s authority.

Evidence and Expert Analysis

PPP arbitration commonly involves millions of documents and several technical disciplines.

Relevant evidence may include:

• The implementation agreement;
• Tender documents;
• Feasibility studies;
• Financial models;
• Design documents;
• Construction programmes;
• Payment certificates;
• Independent-engineer reports;
• Traffic or demand data;
• Service-performance records;
• Public-authority correspondence;
• Regulatory approvals;
• Financing agreements;
• Board minutes;
• Termination notices.

Experts may be required in:

• Engineering;
• Delay analysis;
• Traffic forecasting;
• healthcare operations;
• Finance;
• Valuation;
• Accounting;
• Public regulation;
• Quantum;
• Foreign exchange;
• Project finance.

The tribunal should distinguish legal interpretation from technical calculation. For example, the tribunal determines the contractual meaning of “Compensation Event,” while the delay and quantum experts calculate its consequences.

Drafting an Effective PPP Arbitration Clause

A PPP arbitration clause should address more than the institution and seat.

It should define:

1. The disputes covered;
2. Whether administrative-act challenges remain before Turkish courts;
3. The arbitration institution or ad hoc rules;
4. The legal seat;
5. The language;
6. The number and qualifications of arbitrators;
7. The governing law;
8. The law governing the arbitration agreement;
9. Emergency and interim measures;
10. Multi-tier negotiation and expert procedures;
11. Consolidation with related agreements;
12. Confidentiality;
13. Service of notices;
14. Time limits;
15. Allocation of costs.

An illustrative clause may provide:

Any contractual dispute, controversy or claim arising out of or in connection with this Agreement, including any dispute concerning its formation, validity, interpretation, design, construction, financing, completion, payments, performance deductions, guarantees, change in law, force majeure, termination, handback or damages, shall be finally resolved by arbitration under the agreed arbitration rules.

The seat of arbitration shall be Istanbul, Türkiye. The tribunal shall consist of three arbitrators. The language of arbitration shall be English. Turkish law shall govern the merits.

The clause must be adapted to the statutory project framework. In healthcare PPPs, for example, the mandatory Turkish-law requirement must be observed.

Multi-Tier Dispute Resolution

PPP agreements often use several stages before arbitration.

These may include:

• Project-level negotiation;
• Senior representative meeting;
• Independent engineer determination;
• Expert determination;
• Dispute board;
• Mediation;
• Arbitration.

The clause should state whether each stage is mandatory and identify clear time limits.

A poorly drafted escalation clause may create a jurisdictional dispute over whether arbitration was commenced prematurely.

The contract should also distinguish between issues suitable for technical expert determination and those requiring a legal tribunal.

Expert determination may be appropriate for:

• Index calculations;
• Performance data;
• Technical measurement;
• Completion testing;
• Refinancing calculations.

Arbitration may be more appropriate for:

• Contract interpretation;
• Wrongful termination;
• bad faith;
• authority;
• damages;
• jurisdiction;
• public-law interaction.

Annulment and Enforcement

A Turkey-seated international PPP award may be challenged only on the limited grounds provided by the International Arbitration Law.

These grounds concern matters such as:

• Invalid arbitration agreement;
• Improper tribunal constitution;
• Excess of jurisdiction;
• Serious procedural irregularity;
• Failure to respect equality or the right to be heard;
• Non-arbitrability;
• Public policy.

The annulment court should not normally repeat the technical and financial merits of the PPP dispute.

A foreign-seated commercial PPP award may require recognition and enforcement under the New York Convention or Turkish private international law.

The New York Convention provides an international framework for recognition and enforcement subject to limited defences. Türkiye is a party to the Convention.

Where the award debtor is a state or public entity, recognition of the award must be distinguished from execution against particular assets.

An arbitration agreement does not necessarily amount to a general waiver of immunity from execution. Assets dedicated to sovereign or public functions may be treated differently from assets used for commercial purposes under the applicable enforcement law.

Practical PPP Arbitration Checklist

Before signing or commencing arbitration under a Turkish PPP agreement, the parties should determine:

1. Which statute authorises the project;
2. Whether the agreement is a private-law contract or concession;
3. Whether the public authority had power to agree to arbitration;
4. Whether a foreign element is required and established;
5. Whether Law No. 4501 applies;
6. Whether Turkish substantive law is mandatory;
7. Whether the seat may be located abroad;
8. Which disputes remain within administrative jurisdiction;
9. Whether all lenders and guarantors are bound;
10. Whether expert determination is mandatory;
11. How construction and operation disputes interact;
12. Whether demand or availability payments are defined clearly;
13. How change in law and force majeure are allocated;
14. Which termination compensation formula applies;
15. Whether debt assumption exists;
16. Whether lenders have step-in rights;
17. Whether interim judicial protection may be needed;
18. How confidential public and financial information will be protected;
19. Where the award debtor owns executable assets;
20. Whether investment treaty rights may exist separately.

Frequently Asked Questions

Can a PPP dispute be arbitrated in Türkiye?

Yes, where the applicable legislation permits arbitration and the parties have concluded a valid arbitration agreement. The statutory framework and legal character of the project contract must be examined.

Can public-service concession disputes be submitted to arbitration?

Yes. Article 125 of the Turkish Constitution permits national or international arbitration for disputes arising from public-service concession agreements. International arbitration requires a foreign element.

What is the foreign element under Law No. 4501?

It may arise where a qualifying foreign investor participates in the project company or where foreign capital, credit or guarantees are required for implementation of the project.

Are build-operate-transfer agreements private-law contracts?

Implementation agreements concluded under Law No. 3996 are expressly governed by private-law provisions.

How long can a Law No. 3996 BOT agreement last?

The published statutory framework provides a maximum term of 49 years.

Can a healthcare PPP agreement provide for arbitration?

Yes. Law No. 6428 permits the parties to choose arbitration under the Turkish International Arbitration Law while requiring Turkish law to govern the merits.

Must healthcare PPP arbitration be seated in Türkiye?

The original law contained such a condition, but the relevant wording was removed by a 2015 amendment intended to permit a foreign arbitration seat.

Can a PPP tribunal annul an administrative regulation?

Not necessarily. A tribunal may determine contractual consequences, while annulment of a regulatory or administrative act may remain within the jurisdiction of the competent administrative court.

Can lenders participate in the PPP arbitration?

Only where they are bound by the relevant arbitration agreement. The direct agreement and financing documentation should contain compatible dispute resolution provisions.

What happens to BOT assets when the contract expires?

Under Law No. 3996, the investment and services transfer automatically and without charge to the administration, free of liabilities and in a maintained, operational and usable condition.

Can the state assume project financing after early termination?

Turkish legislation provides debt-assumption mechanisms for qualifying projects, subject to the statutory conditions, approvals and relevant agreements. It is not an automatic guarantee for every PPP financing.

Can a foreign PPP investor bring an investment arbitration claim?

Potentially, where a qualifying treaty protects the investor and investment, the state has consented to arbitration and the relevant substantive and procedural requirements are satisfied. A contractual breach alone is not automatically a treaty violation.

Can a foreign PPP award be enforced in Türkiye?

A qualifying foreign award may be recognised and enforced under the New York Convention or Turkish private international law, subject to limited refusal grounds and any applicable rules concerning execution against public assets.

Conclusion

Public-private partnership arbitration in Turkey provides an important dispute resolution mechanism for major infrastructure, healthcare, transportation, energy and public-service projects.

The Turkish constitutional framework recognises two central principles.

First, legislation may determine which public investments and services can be performed or transferred through private-law contracts. Second, disputes arising from public-service concession agreements may be referred to national or international arbitration, although international concession arbitration requires a foreign element.

The applicable statutory framework must be identified before drafting or enforcing an arbitration clause.

Law No. 3996 classifies build-operate-transfer implementation agreements as private-law contracts. It regulates project-company responsibility, contract duration, demand guarantees and transfer of the project to the administration at the end of the term.

Law No. 6428 regulates healthcare PPPs, including construction, facility use, services, payments, refinancing and project transfer. It permits arbitration under the International Arbitration Law while requiring Turkish substantive law.

Law No. 4501 establishes detailed principles for arbitration in public-service concession agreements. It addresses the foreign element and allows arbitration in Türkiye, abroad or before an international institution.

PPP disputes may arise during every stage of the project:

• Tender and financial close;
• Site delivery;
• Design;
• Construction;
• Testing and completion;
• Operation;
• Public payments;
• Performance deductions;
• Refinancing;
• Termination;
• Handback.

The arbitration clause should therefore cover the full project lifecycle.

Particular attention should be given to the distinction between contractual conduct and sovereign administrative action. An arbitral tribunal may award contractual compensation without necessarily possessing authority to annul a regulatory act or bind a public body that did not consent to arbitration.

The project documentation should also coordinate the implementation agreement with:

• EPC contracts;
• Operation and maintenance agreements;
• Financing documents;
• Direct agreements;
• Guarantees;
• Hedging agreements;
• Shareholder arrangements.

A PPP arbitration strategy must begin before a dispute arises. Parties should preserve construction records, financial models, payment calculations, public-authority instructions, service data and lender correspondence.

Termination and enforcement planning are equally important. Early termination may require asset transfer, compensation, lender step-in and debt assumption. A favourable award has limited commercial value where no realistic enforcement route exists.

For public authorities, project companies, sponsors, lenders and contractors involved in Turkish infrastructure projects, specialised Turkish PPP and arbitration counsel can assist with contract drafting, risk allocation, interim protection, expert evidence, investment treaty analysis and enforcement of arbitral awards.