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Legal Alerts

29/06/2020

Electronic Agreements Introduced for Financial Transactions

Legal Alerts
Banking & Finance
Capital Markets
Financial Institutions

Recent Developments

Law No. 7247 on Amending Several Laws and Decrees (the “Amendment“) was published in the Official Gazette dated June 26, 2020 and numbered 31167. The Amendment introduces many changes, including electronic agreements that may be entered into by banks and debit or credit card issuers; as well as financial leasing, factoring and financing companies, for establishing relationships with clients.

What’s new?

Banking Law

The Amendment has changed Article 76 of the Banking Law No. 5411 (the “Banking Law“), which governs clients’ rights. Prior to the Amendment, the minimum requirements for the form and substance of agreements entered into between banks and individual clients were to be determined by banking associations upon the Banking Regulatory and Supervisory Authority’s (the “BRSA“) approval.

The Amendment sets forth that banking agreements between banks and clients may now be duly established:

  1. in writing
  2. distantly by using a telecommunications device
  3. whether distantly or not, by any telecommunications device that enables client authentication and is considered by the BRSA an appropriate substitute for written agreements

Law on Bank Cards and Credit Cards

The Amendment has changed Article 24 of Law No. 5464 on Bank Cards and Credit Cards, which governs provisos. As in the Banking Law, credit or debit card institutions and cardholders may enter into agreements via any telecommunications device that enables client authentication and is considered by the BRSA an appropriate substitute for written agreements.

The Law on Financial Leasing, Factoring and Financing Companies

The Amendment introduces electronic agreements to Law No. 6361 on Financial Leasing, Factoring and Financing Companies.

Pursuant to the Amendment, financial leasing agreements, factoring agreements and financing agreements can now be duly established:

  1. in writing
  2. distantly by using a telecommunications device
  3. whether distantly or not, by any telecommunications device that enables client authentication and is considered by the BRSA an appropriate substitute for written agreements

The Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions No. 6493

Article 12/3 of the Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions No. 6493, which governs framework agreements entered into by and between clients and payment service providers, was changed with the Amendment.

Accordingly, these agreements can now be duly established:

  1. in writing
  2. distantly by using a telecommunications device
  3. whether distantly or not, by any telecommunications device that enables client authentication and is considered by the Central Bank of the Republic of Turkey an appropriate substitute for written agreements

Capital Markets Law

The Amendment has changed Article 42 of the Capital Markets Law No. 6362, which governs agreements entered into with clients.

Pursuant to the Amendment, clients may now duly enter into agreements with investment institutions and portfolio management companies:

  1. in writing
  2. distantly by using a telecommunications device
  3. whether distantly or not, by any telecommunications device that enables client authentication and is considered by the Capital Markets Board an appropriate substitute for written agreements

Conclusion

The Amendment aims to ensure compliance with the social distancing needs brought by the COVID-19 outbreak and to keep pace with today’s technology for establishing client relationships. With the Amendment, banks, credit and debit card institutions and financial leasing, factoring and financing companies are now authorized to build relationships with clients without requiring any physical paperwork and wet signature. Relationships with clients can now be commenced and concluded through digital media.

Agreements electronically executed may give rise to certain proof difficulties. The most controversial point relating to proof is whether the declaration of intent for the establishment of a particular electronic agreement in fact belongs to the counterparty. However, we believe this difficulty will not be predominant in the given case, since parties will use telecommunications devices that enable client authentication and are approved by the relevant authorities mentioned above pursuant to the Amendment.

In addition, proof difficulties may also occur when the electronic agreement is amended after being executed. This risk may arise if parties use a telecommunications device that is incapable of affirming the content of the agreement.

Lastly, another practical issue may be the difficulty of presenting electronic data to the court. Nevertheless, with the technological developments, we believe practical and proof-related difficulties will be easier to manage and parties will increasingly prefer such methods.

Please stay up to date with further developments through the Esin Attorney Partnership Coronavirus Helpdesk.