Client Alert:

New Railway Law Ends the State Monopoly Over Railways and Enables Operations by the Private Sector

The Law on Liberalization of Turkish Railway Transportation Numbered 6461 ("Law No 6461") has been published in the Official Gazette and is now in full force and effect as of May 01, 2013. Previously, the railways were under the strict control and regulation of the state. By the entry into force of the Law No 6461, the private sector will now play an active role in railway infrastructure and transportation.

In essence, the government aims to increase and encourage the use of railway transportation. Notwithstanding that the state will still have control over the national railroads, the most important change brought by this new legislation is that the private sector will henceforth also have the opportunity to be active in the railway sector provided they are authorized by the Ministry of Transportation, Maritime Affairs and Communications ("Ministry"). With this legislation, private companies can now either purchase or lease their own railroad cars to use for commercial purposes.

Pursuant to Law No 6461, a new public entity namely TCDD Tasimacilik Anonim Sirketi ("TCDD A.S.") will be incorporated and will act as a railway wagon and railway car operator. Previously, Turkish State Railways ("TCDD") was a state monopoly, acting as the sole authorized operator of the railways for the carriage of passengers and cargo. As of May 01, 2013, TCDD A.S and/or private entities will be entitled to be designated as an authorized railroad car operator.

Article 6 of the Law No 6461 provides that public or private entities may be authorized by the Ministry to:

(i) build their own railway infrastructure,

(ii) act as railway infrastructure operators on the railway infrastructure which is either owned by themselves and/or other companies,

(iii) act as a railroad car operator within the national railway infrastructure network.

The procedures and principles on how these authorizations are to be granted will be regulated by a regulation to be issued by the Ministry at a future date.

Additionally, pursuant to Articles 5 and 6, if private entities demand railway connection lines or wish to build their own railway infrastructure, the Ministry will expropriate real-estate necessary to build such infrastructure. Following the expropriation, easement rights shall be created in favor of the private entity for a maximum period of 49 years. The cost of the expropriation shall be levied by the Ministry to the private entity. After the end of the above period, the title to the real estate or any properties built on such real estate shall automatically be transferred to the Turkish Treasury free of any charges or compensation.

Moreover, according to Article 3 of the Law No 6461, TCDD is also entitled to lease the areas of the railroad infrastructure which is not related to the railway traffic to third parties or allow third parties to operate these areas.

Finally, by Article 8 of the Law No 6461, certain railway operators (to be determined by the Council of Ministers) shall be responsible for providing various public services. An agreement shall be executed between the Ministry and railroad car operators in relation to such services.


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