This document has been provided by the
International Center for Not-for-Profit Law (ICNL).

ICNL is the leading source for information on th e legal environment for civil society and public
participation. Since 1992, ICNL has served as a resource to civil society leaders, government
officials, and the donor community in over 90 countries.

Visit ICNL’s Online Library at
https://www.icnl.org/knowledge/library/index.php
for further resources and research from countries all over the world.

Disclaimers Content. The information provided herein is for general informational and educational purposes only. It is not intended and should not be
construed to constitute legal advice. The information contai ned herein may not be applicable in all situations and may not, after the date of
its presentation, even reflect the most current authority. Noth ing contained herein should be relied or acted upon without the benefit of legal
advice based upon the particular facts and circumstances pres ented, and nothing herein should be construed otherwise.
Translations. Translations by ICNL of any materials into other languages are intended solely as a convenience. Translation accuracy is not
guaranteed nor implied. If any questions arise related to the accuracy of a translation, please refer to the original language official version of
the document. Any discrepancies or differences created in the tr anslation are not binding and have no legal effect for compliance or
enforcement purposes.
Warranty and Limitation of Liability. Although ICNL uses reasonable efforts to include ac curate and up-to-date information herein, ICNL
makes no warranties or representations of any kind as to its a ccuracy, currency or completeness. You agree that access to and u se of this
document and the content thereof is at your own risk. ICNL discl aims all warranties of any kind, express or implied. Neither ICNL nor any
party involved in creating, producing or delivering this document shall be liable for any damages whatsoever arising out of access to, use of
or inability to use this document, or any e rrors or omissions in the content thereof.

Comparative Report on
Turkish Foundation Law Provisions

September 2004

All rights reserved 2004. Not to be quoted without permission.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

1 All rights reserved. Not to be quoted without permission.

Summary of the Comparative Report Project

This report was developed as part of TUSEV’s Comparative Reports Project, an initiative of
TUSEV’s NGO Law Reform Programme. The project was implemented with the technical
assistance of the International Center for Not-for-Profit Law (
www.icnl.org ). The objective of
this project was to:

• Conduct extensive research to identify specif ic issues in legislation governing NGOs
(including both associations and foundations) which merit reform;
• Examine each specific issue from a comparative law perspective and
• Propose specific and feasible resolutions.

The desired impact was to develop a succinct set of reports listing issues which merit reform,
providing key decision makers with comparative perspectives and information on
international “good practices”.

There were three separate comparative reports developed under this initiative: Associations
Law Comparative Report, Foundations Law Com parative Report and Public Benefit Law
Comparative Report. The selection of the issues to be examined in each report was based
on experiential inputs from NGOs (TÜSEV rece ives at least 10 calls weekly from NGOs
facing several legal and fiscal problems), comments from other NGOs, and analysis of
legislation/regulations. Some of the topics covered in the reports are:

• Cumbersome regulations and excessive interference of State in internal affairs of NGOs;
• Prior authorization requirements to engage with international organizations;
• Limitations on freedom of association;
• Weaknesses in public benefit definitions and application of this status.

The reports were developed in Turkish and English, and disseminated to the general public
as well as key decision makers, and parliament commissions. TUSEV expresses its
appreciation to the International Center for Not-for-Profit Law (ICNL)
1 and Bilgi University
Law Faculty 2 for their research and invaluable inputs in the preparation of this report on
foundations law.

Overview of Legal Framework and R egulatory Status of Foundations in Turkey

Foundations formed after the establishment of the Republic of Turkey are regulated by the
General Directorate of Foundations (abbreviated as GDF) which is a division in the Prime
Ministry, with a Director appointed by the Prime Minister. The GDF has approximately 300
personnel with district offices all over the country, and is responsible for the administration of
over 40.000 ‘old’ (Ottoman) foundations wh ich no longer have descendents, approximately
300 old foundations which still have descendents, and for the regulation
of approximately
4.500 ‘new’ (Republic Era) foundations, 1.500 of which are State-formed (public
foundations).

The first foundation law in the Republic of Turkey was developed in 1935, and revised in
1970. Since then, the legislation has been updated/modified with regulations (details on how
the law is applied), decree law, statutes and several communiqués. A new law is now being
drafted, which intends not only to address much needed reforms, but also to harmonize the
law and collect it under one framework. The law is currently in the proc
ess of being drafted,
and is expected to be presented to Parliament in late Fall 2004.
1 Douglas Rutzen Washington D.C office, David Moore Budapest office 2 Nilgün Ba şalp under the supervision of Law Faculty Dean Prof. Dr. Turgut Tarhanl ı

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

2 All rights reserved. Not to be quoted without permission.
Report Contents and Structure

As stated above, this report was developed by capturing current operational problems faced
by foundations as well as analysis and research of foundation law, regul
ations and a
multitude of circulars which have been issued over the past years. Indeed, the ‘scattered’
state of foundations law made this task quite challenging. This report addresses the following
key issues which were considered to be critical segments which require reform:

™ Endowment
™ Founding Members
™ Board Membership and Board Meetings
™ Asset Management
™ International Cooperation

Each section in the report provides an overview of the current situation and challenges,
followed by comparative perspective and co mments on international good practice on each
respective topic.

A. Endowment

According to Turkish Civil Code, there is no minimum capital requirement for the endowment
of a foundation. The only criteria requires that there be ‘enough’
capital/assets allocated to
realize objectives as stated in the foundation by-laws. The actual amount is determined on a
case-by-case basis by the courts during the registration process. However, two
communiqués of General Foundations Directorate dated 21 September 1997 and 21 January
1998 introduced additional limitations to these criteria. According to the provisions, the
establishment of a foundation requires a minimum (as of 2004) of 375 to 940 Billion TL (app.
USD 250,000 to 627,000) which is determined specifically (by the courts) according the
purpose of the foundation.

Comparative Perspective

In Europe, foundations are based on the Roman law concept of universitas rerum, requiring
the designation of property for a particular purpose. The approach for determining what
constitutes sufficient capitalization (sometimes styled as an “endowment”)
3 varies throughout
Europe. Three approaches, however, are most common:

(1) A fixed amount explicitly stated in law;
(2) A general requirement that capital be sufficient to accomplish the foundation’s
purposes;
(3) No initial property requirement.

Among countries requiring a fixed amount of minimum capital at establishment, most
countries require between 5,000 and 100,000 Euro. The following provides some prominent
examples of countries requiring set minimum endowments by law
4:
3 For purposes of this section, we will use the terms “minimum capitalization” and “minimum endowment”
interchangeably.
4 See Foundations in Europe , Edited by Schluter, Then & Walkenhorst, Berterlsmann Foundation 2001. Please
note that the amounts are in so me cases only approximate.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

3 All rights reserved. Not to be quoted without permission.

• Austria: 72,670 EUR required for private foundations (Privatstiftung);
• Belgium: 24,800 EUR required as an initial capital contribution, based on a
Ministry of Justice requirement;
• Denmark: 34,000 EUR required as minimum initial capital;
• Finland: 25,050 EUR required as minimum initial capital;
• Liechtenstein: 30,000 CHF (approximately 19,500 EUR) required as minimum capital;
• Czech Republic: 500,000 CZK (approximately 15,560 EUR);
• Slovakia: 200,000 SK (approximately 4970 EUR).

Similar to the listed countries, France also requires a fixed initial capital to establish a
foundation. But France requires significantly higher initial capitalization, and indeed the
highest among EU Member States. So-called state-approved foundations must have
minimum capital of 762,000 EUR. Even then, the Conseil d’Etat has the power to determine
whether a foundation’s endowment is sufficient to pursue its aim and can demand additional
initial capital.
5

In several other countries, the law sets no fixed minimum endowment amount, but instead
requires that minimum assets at establishment be sufficient or appropriate to meet the
foundation’s purposes. In Austria, for example, the Federal Foundations and Funds Act
specify no minimum value for the capital of a general interest foundation (Stiftungen); capital
must be sufficient to achieve the stipulated purpose. Similarly, in Germany, there is no
minimum capital required by law, but regulatory authorities must determine whether or not
foundation assets are sufficient to pursue the stated purpose; typically authorities require a
minimum of 50,000 EUR for foundations. Also, in Italy, there is no minimum endowment
required by law, but the state must assess whether its assets will be sufficient to fulfill its
aims. Regulatory bodies (at the ministry or regional levels) may set different minimum
amounts; the highest minimum amount generally required by ministries is about 100,000
EUR.

The trend among the recently acceding EU countries is not to require a fixed minimum
endowment. Hungary and Poland, as well as Estonia, Latvia, Lithuania and Slovenia
generally require that minimum assets be appropriate for the purposes of the foundation.
Registration judges in Hungary typically require foundations to have initial assets amounting
to between 100,000 – 200,000 HUF (390-780 EUR). Similarly, in Poland, the law does not
establish a minimum or maximum value for the initial endowment; where a foundation plans
to engage in economic activities, however, a minimum initial endowment of 1000 ZL (210
EUR) is required. Bulgaria requires no initial capital for the establishment of a foundation.

Interestingly, countries’ decisions concerni ng minimum endowment requirements are often
not closely correlated with their level of economic development. Indeed, similar to the
approach in Bulgaria, several West European countries adopt an extremely liberal approach
toward initial endowments, not requiring any initia l property at all. For example, Dutch law
requires no property at the time of establishment; instead, it is sufficient that assets are
available when needed. Government supervision is only relevant where the foundation lacks
any resources and has no prospect for acquiring any resources, which can trigger court-
ordered dissolution. In England, no minimum endowment is required, although the lack of
sufficient financial means could lead to a considerable delay in being registered with the
Charity Commission.

5 It is therefore most accurate to speak of French law as a hybrid system, since it both requires a fixed initial
capital and invests the Conseil d’Etat with discretionary authority to review the initial capital and determine its
sufficiency
.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

4 All rights reserved. Not to be quoted without permission.
A common question is whether it is better: (1) to require a fixed, albeit nominal, capitalization
requirement, or (2) to grant registration authorities the discretion to determine what
constitutes a sufficient amount. The first approach offers clarity and an objective basis for
decision-making. The second approach offers more flexibility. At the same time, without
clear criteria as to what constitutes “sufficient” capital, registration officials are in an awkward
position, effectively required to exercise discretion in the registration process. In the end,
there is no “best practice” in this regard. Resolution of this issue is a country-specific
decision, requiring an analysis of domestic legal requirements and whether the benefit of
flexibility outweighs the risk that registration officials will exercise their discretion in an
arbitrary and restrictive manner.

Finally, it is significant to note that countries insisting on high capitalization requirement often
consider the creation of a third not-for-profit organizational form: a non-membership, non-
property form. These organizations are primarily grant-seeking or income-generating NGOs.
Often these NGOs are service-providing organizations, such as think tanks, social service
organizations, not-for-profit universities, and training centers. This form has a variety of
appellations, including the so-called “public benefit companies” common in the Czech
Republic (and Hungary).

B. Founding Members

According to the Turkish Constitution Article 33, all real and legal persons have the right to
establish a foundation. This right can only be restricted in the interest of national security and
public order, preventing crime, protection of public health or good morals, and protecting the
rights of others only with the law.

In addition to these provisions, the Civil Code also requires founders to have “the capacity to
act” (which is described in detail in the Code).

However, two communiqués issued by the General Directorate of Foundations in 1997 and
1998 created limitations on the original provision as stated in the Civil Code. According to
these regulations, real persons convicted of a crime (including political and ideological
convictions) and/or sentenced to imprisonment for over six months indefinitely revokes their
eligibility to be a founder.

Comparative Perspective

A restriction precluding convicted criminals from founding a foundation would seem
inconsistent with international law and regional good practices. This section will e
xamine the
application of the European Convention on Human Rights and Fundamental Freedoms to
this issue, which will serve as a springboard for subsequent international law analyses.

As a general rule, any natural or legal person may establish a foundation in European
countries. In Poland, for example, foundations may be founded by “individuals regardless of
their citizenship and domicile, or by legal entities with offices in Poland or abroad.” In
Hungary, a private individual, legal entity or unincorporated economic association may form a
foundation; there are no citizenship or residency requirements. In Germany, private
individuals, business corporations, associations and public bodies may establish a
foundation; only the foundation itself is precluded from doing so. No restrictions apply to
founders in the Netherlands.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

5 All rights reserved. Not to be quoted without permission.

It seems virtually unprecedented to preclude convicted criminals from establishing
foundations. 6 Indeed, Vaclav Havel, as a former political prisoner, would be precluded from
establishing a foundation. Consider also the example of Nelson Mandela in South Africa.

Barring convicted criminals from founding foundations would also seem problematic under
international law, and specifically the European Convention of Human Rights and
Fundamental Freedoms (ECHR). This is true even if the government retained the power to
waive this prohibition for particular individuals. The Convention extends a whole series of
rights to individuals – and in some cases, to legal entities
7 – including the freedom of
association, freedom of speech, the right to privacy and the right to property. Restrictions
are only allowed under specific conditions and on specific grounds:

1) A restriction must be prescribed by law;
2) Restrictions are only allowed in the interest of national security, territorial integrity and public safety, to prevent disorder and penal acts, the protection of
public health or good morals, the good name or rights of others, to prevent the
disclosure of information received in confidence or to guarantee the authority
and impartiality of courts;
3) Restrictions are only acceptable when necessary in a democratic society, which incorporates the principle of proportionality.
4) Restrictions must not violate Article 14 of the Convention, which forbids
discrimination.

Of primary concern is Article 11 8 – embodying the freedom of association – which recognizes
the right of individuals to organize themselves on a voluntary basis for the realization of a
specific purpose. Article 11 is closely connected with Article 10
9 (freedom of speech), for it is
6 In the U.K., anyone who has been convicted of an offence involving deception or dishonesty, unless the
conviction is spent, can act as a charity trustee. This rest riction is limited, however, to managing charitable trusts,
which is distinct from establishing a foundation.
7 The Convention allows “any person, non-governmental organization or group of individuals claiming to be a
victim of a violation” to submit an ap plication after meeting the admissibility criteria (Article 25, ECHR). It can be
inferred, therefore, that NGOs are protected by certain fundamental right s; the right to complaint would be
meaningless with no substantive rights to protect. Thus, it can be assumed that refe rences in the Convention to
“everyone” may in principle refer to natural and legal persons, including NGOs. Indeed, many decisions by the
European Court confirm the standi ng of NGOs under the Convention.
8 Article 11 establishes that:

Everyone has the right to freedom of peaceful asse mbly and to freedom of association with others,
including the right to form and to join trade unions for the protection of his interest.

No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law
and are necessary in a democratic society in the interest of national security or public safety, for the
prevention of disorder or crime, for the protection of health or morals or for the protection of the rights
and freedoms of others. This article sh all not prevent the imposition of lawful restrictions on the exercise
of these rights by members of the armed forces, of the police or of the administration of the State.”
9 Article 10 establishes that:

Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to
receive and impart information and ideas without interference by public authority and regardless of
frontiers. This article shall not prevent States from requiring the licensing of broadcasting, television or
cinema enterprises.

The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such
formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a
democratic society, in the interests of national secu rity, territorial integrity or public safety, for the
prevention of disorder or crime, fo r the protection of health or morals, for the protection of the reputation
or rights of others, for preventing the disclosure of information received in confidence, or for maintaining
the authority and impartia lity of the judiciary.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

6 All rights reserved. Not to be quoted without permission.
through voluntary organizations that individuals can exercise their freedom of expression
most effectively. The European Court of Human Rights, in considering the scope of Article
11, has expressly held that Article 11 applies to individuals and their right to form political
parties and associations; presumably the protection of the freedom of association also
extends to other organizational forms based on membership or an associational structure.

There remains a question, however, whether the freedom of association protects the right to
form non-membership legal forms, like foundat ions. The better argument would seem to be
that foundations are deserving of protection under Article 11 – and the burden is on the
government to justify restrictions against individuals wishing to form foundations. Both
membership and non-membership forms are well established in the leading legal systems
around the world – and in all European countries. Through either form, individuals can
pursue collective interests and exercise their rights under Articles 10 and 11. The
organizational form chosen usually depends on internal governance or activity
considerations, rather than on any attribute fundamental to the freedom of association
itself.
10

If Articles 10 and 11 indeed embrace foundations within their protection, then the government
must demonstrate why restrictions on individual founders are ‘necessary in a democratic
society’ to achieve enumerated state interests. Quite simply, it is unlikely that this standard
would be met. Moreover, under some legal systems it would be inappropriate for the NGO
law to impose “punishments” not specified in the criminal law, and it might be interesting to
examine this topic under Turkish law.

C. Board Membership and Board Meetings

The Executive Board and Supervisory Board are two mandatory organs of a foundation,
required by law. The structural and administrativ e structure of the board is formulated in the
Civil Code Article 106, and is required to be described in further detail in the by-laws of the
foundation. The Civil Code does not state a minimum or maximum number of members of
these organs, although the GDF communiqué of 1997 requires a minimum of 3, and
maximum of 13 members in the board (to be determined specifically according to the
purpose of the foundation). Comparatively, Turkish Corporate Law, requires at least three
board members in a corporation, with no maximum limit.

Aside from the issue of requiring a minimum and maximum limit for board members, which
has been an ongoing debate, there are two critical issues concerning board membership in
Turkish foundations:

(1) Restrictions precluding foreigners from serving as board members of foundations,
(2) Permanent disqualification of a person from serving on the board of any foundation if they
are removed from the board of any particular foundation, and

(3) Participation of Government official from the GDF at annual foundation general assembly
(trustee) meetings.

These three issues are described in detail below, with comparative perspectives following
each issue respectively.

10 See “Freedom of Association: Recent Developments Re garding the ‘Neglected Right’”, Leon E. Irish and Karla
W. Simon, International Center for Not-for-Profit Law 2000.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

7 All rights reserved. Not to be quoted without permission.
1. Requirement of Turkish citizenship

As per the Turkish Constitution Article 33, all real and legal persons have the right to
establish a foundation. This implies no discrim ination between Turkish citizens and non-
Turkish citizens (foreigners) – both of which would have to abide by the same laws and
regulations regarding foundations.

However, according to the Statute of the Foundations dated 1970, a foreigner can be
founder, appoint board members, but is not eligible to be a board member herself. 11 These
provisions create serious problems in implementation.

According to Turkish Corporate Law, there are no limitations for foreigners as board
members. However, they cannot constitute the majority on the supervisory board.

Comparative Perspective

Foreigners are permitted to serve as both founders and board members of foundations in
virtually all EU countries. Some countries, including Italy, Finland, Estonia and Denmark,
require that all or a majority or at least some board members be residents in the country
where the foundation sits, but they do not require that board members be citizens. But in
many other countries, such as Hungary and Poland, there is neither a citizenship nor
domicile requirement for board service.

Interestingly, in 1999, Belgium was condemned by the European Court of Justice for the
nationality requirements contained in two separate laws governing non-pr
ofit associations.
(
Kingdom of Belgium v. Commission , Case C-172/98, June 29, 1999) 12. Belgium’s 1921 law
on non-profit associations (NPA law) required that the membership of a non-profit
association should consist of at least 75% Belgian nationals; associations failing this
requirement were deprived of legal personality. Similarly, the 1919 law on international
associations (IA law) required at least one Belgian national in the management of the
association.

The European Commission alerted the Belgian government to the problem in 1996. The
argument was that the nationality and residency requirements of the Belgian laws violated
the rights of citizens of other EU Member States by discriminating on the basis of nationality.
When Belgium failed to amend its legislation, an action was brought before the European
Court of Justice, which held:

(Kingdom of Belgium v. Commission , Case C-172/98, (June 29, 1999)).

Moreover, the provisions of the European Convention are secured to “everyone within the
jurisdiction” of the member-states. Thus, a foreigner may not be excluded from the
fundamental rights protected under the Convention. Barring foreigners from serving as
11 There is one exception to this; in t he instance that the foundation has an operating inst itution affiliated with it
(e.g. hospital, school , museum etc.), a non-Turkish citi zen is eligible to be a board member. They cannot,
however, constitute the majority and requir es the permission of Council of Ministers.
12 See also “Belgian Non-Profit Associations and Belgian International Associations Lose Belgian Nationality and
Residency Requirements for Their Members and Directors, Bart Servaes, International Journal for Not-for-Profit
Law, Vol. 3, Issue 2 (
www.icnl.org .).

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

8 All rights reserved. Not to be quoted without permission.

board members is a potential infringement against Article 11. In other words, due to this
restriction, founders of foundations are prevented from associating as they choose.

Based on the ECHR’s analytical framework (outlined above), the burden falls to the
government to justify any restriction as nece ssary in a democratic society. Indeed, the
Croatian Constitutional Court held that nationality requirements applicable to founders of
association were unconstitutional and violated Article 11 of the Convention.
13 The 1997
Croatian Law on Associations provided that foreign citizens who permanently reside in
Croatia, or who have legally resided in Croatia for more than one year, can be founders of a
registered association, under the condition of reciprocity. The Court found that the
reciprocity requirement violated Article 11 of the Convention, which guarantees freedom of
association to “everyone”, without further reference to the country of citizenship or other
conditions. According to the Court, “there are no legitimate reasons
which would justify
restrictions imposed on foreign domestic and legal persons in exercising the freedom of
association which are attached to the action of their respective states.”

2. Termination of Board Members

According to the Statute of the Foundations Article 23, board members should administer the
foundations according to their by-laws and should be responsible and prudent managers. If a
board member does not comply with the laws and regulations, their board membership may
be terminated by a court decision upon the application of GDF. Terminated board members
are no longer eligible (for an indefinite period of time) to be board members in other
foundations.

According to Turkish Corporate Law, board members can only be terminated with a general
assembly decision.

Comparative Perspective

A provision which precludes a disqualified board member from ever serving on another
foundation’s board is unusual restriction in the European context. Certainly, we see in other
countries the termination or disqualification of a board member available as a disciplinary
sanction. Dismissal of a board member is a m easure applied primarily to remove those found
acting in serious breach of duty toward the foundation.

Permanent disqualification, however, is atypical. Moreover, to the extent it exists, it should
be imposed only for the most serious violations of law, limited in time, and subject to strict
procedural safeguards. Again, we are not sure that it makes sense in the Turkish context to
impose this restriction at all, but if Turkish stakeholders decide that it makes sense, the
Netherlands model is instructive. There, a dismissal disqualifies the board member involved
from holding a directorship of a foundation for a period of five years following his or her
dismissal by the court (Article 2:298 CC). It is imperative to emphasize that: (1) the removal
is ordered by the court, rather than by a government agency, and (2) the disqualification is
limited by a fixed term, rather than permanent. Moreover, this sort of remedy is generally
imposed only for serious breaches of law.

3. Governmental Participation in Foundation Meetings

The Communiqué of GDF dated 1998 requires an official representative to attend
foundation’s general assembly meetings. This regulation also requires foundations to send
13 Decision of the Croatian Constitutiona l Court of February 3, 2000, published in the Offi cial Gazette No. 20 of
February 16, 2000.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

9 All rights reserved. Not to be quoted without permission.
invitations to the general assembly participants by registered mail or to publish the date and
the location of the assembly in a nation-wide newspaper.

Comparative Perspective

To allow government representatives to atte nd board meetings of private, voluntary
organizations runs counter to European standards. Furthermore, such a rule is almost
certainly a violation of the European Convention of Human Rights (namely the right to
privacy as protected under Article 8).

There is a general recognition in EU countries that board meetings are t
he private, internal
affairs of foundations and NGOs. Government officials have no more right to attend
meetings of foundations than they have to attend the board meetings of commercial
companies. Despite differences in supervi sory approaches, none of the surveyed countries
mandate or allow government attendance at foundation or NGO meetings.
14

Indeed, this view is supported by European Court jurisprudence. The European Court of
Human Rights has declared that the expansion of the words “private life” and “home”, as
mentioned in Article 8
15 of the European Convention, to professional or business activities or
premises is “consonant with the essential object and purpose of Article 8, namely to protect
the individual against arbitrary interference by the public authorities.”
16 Given that Article 8 of
the European Convention applies to professional and business premises, it can be inferred
that Article 8 applies with equal weight to voluntary, not-for-profit organizations, including
foundations. Thus, Article 8 protection woul d seem to prevent the government from
attending meetings of governing bodies (including boards) of NGOs (including
foundations).
17

Moreover, as we have seen, Article 11 pr events any infringement upon the freedom of
association, unless such infringement is prescribed by law and necessary to achieve one of
four legitimate state purposes. Does a provision allowing government representatives to
attend the meetings of NGO governing boards constitute an infringement upon the freedom
of association? Undeniably, yes. While perhaps intended to promote transparency, it also
infringes deeply upon the freedom of association, which includes the freedom to decide who
will be a member and who has the right to attend the organization’s meetings. While clearly
applicable to associations and membership organizations, the same principle can at least
arguably be extended to other NGO organizational fo rms, such as foundations. One could
also argue that this provision undermines the so-called “negative freedom of association” by
requiring that board members invite government officials to participate in meetings with them.

D. Asset Management

14 An interesting exception is Hungary, but this provision is rarely, if ever, applied in Hungary.
15 Article 8 of the European Conventio n on Human Rights runs as follows: (1) Everyone has the right to respect
for his private and family life, his home and his correspo ndence; (2) There shall be no interference by a public
authority with the exercise of this right except such as is in accordance with the law and is necessary in a
democratic society in the interests of national security, p ublic safety or the economic well-being of the country, for
the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and
freedoms of others.
16 Niemetz v. Germany , Judgment of 16 December 1992, Series A, No. 251-B, 16 EHRR (1993), para. 31.
17 Moreover, the state interest in transparency among organizations receivin g significant tax benefits, government
funding, or public donations is often accomplished throug h reporting requirements. This issue will be addressed
in a subsequent white paper focusing on the benefits and obligations arising from “public benefit status.”

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

10 All rights reserved. Not to be quoted without permission.
The issue of asset management is a critical one for Turkish foundations. The Communiqué
of the General Directorate of Foundations dated 1999 gives this department the privilege to
intervene, to permit and to authorize issues related to the foundations’ asset management.

Aside from the fact that the general principle of this law does not facilitate and support the
ability of foundations to manage assets effectively so as to accomplish the foundation
purposes, there are two key issues at hand:

(1) Altering/selling immovable foundation property, and
(2) Requirement of foundations to retain cash assets in State banks.

1. Altering or Selling Immovable Foundation Property

According to Article 113 of the Turkish Civil Code, selling or altering the assets or rights
requires notification to GDF and a court decision. In all cases the GDF has the discretionary
authority to initiate procedures regarding the use, acquisition, and liquidation of assets of a
private foundation.

In contrary to the Civil Code, the Article 27 of the Statute of Foundations (1970) requires the
permission of High Council of the General Foundations Directorate prior to the court
decision. This gives the General Foundations Directorate supreme power over the decision
making process and constitutes a clear violation of Civil Code.

2. Retaining Cash Assets of Foundations in State Banks

The Statute of Foundations (1970) additional Article 1 states that foundations are required to
keep their cash assets in State Banks or Vakif Bank (a quasi governmental bank).

Comparative Perspective

In Europe, there are essentially two common regulatory approaches to the protection of
foundation’s endowment. First, in some countries, the law establishes a general obligation to
maintain the foundation’s endowment (note that m any of these rules do not apply to property
held by the foundation but not part of the foundation’s “endowment”) For example, in
Germany, it is a fundamental principle that the foundation’s endowment be preserved in its
value. Preservation of this endowment means that the value of the sum of assets must be
maintained, while the proceeds are spent for the fulfillment of the foundation’s purpose.
There is a legal restriction on retaining proceeds: only up to 33% of the annual proceeds may
be accumulated into the endowment, independent of the annual rate of inflation. Provisions
in the law regarding asset management are vague; the law mentions value-keeping, safe and
interest-bearing investments, but provides no specific guidance as to the appropriate balance
between yield and risk. Other countries requiring the preservation of the endowment include
Austria (stiftungen), Italy, Slovakia, and the Czech Republic.

In those countries requiring the preservation of the endowment, the challenge for foundations
is how to invest wisely to ensure that the value of the endowment will b
e maintained. Among
EU countries, the most detailed legislative response to this challenge is found in the Czech
Republic – and through the 2002 amendments to the Czech Law on Foundations. The
Czech Law on Foundations provides that a fou ndation must have an endowment of at least
500,000 CZK (approximately 16,000 Euros), which must be preserved. Th
e Law, however,
used to prevent effective endowment management – by prohibiting the investment of assets
from endowments, and by requiring that assets be kept in monetary form in a separate bank
account, real estate, state bonds, patent or author rights, and works of art which generated a
steady income. Once bonds or any other form of assets were sold, the money received
could only be put on a bank account or invested in state bonds.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

11 All rights reserved. Not to be quoted without permission.

Recognizing the restrictive nature of these provisions, in 2002, the Law on Foundations was
amended. Among other notable provisions, Czech foundations are no longer limited to
bonds issued by the Czech state; rather, they may now hold any instrument guaranteed by
the state or any instrument with the same investment grade as government-backed
instruments.

Second, most countries provide for no specific legal restrictions relating to property
management for foundations. 18 Instead, the matter of investment policy is dealt with through
general rules (separate from the foundation law). The governing documents should allow
implicitly or explicitly for the organization to make certain investments. Investments are
commonly allowed, unless this is in conflict with the purpose of the foundation. The
Netherlands serves as a good example of this approach; foundation property is protected by
the general duty of the board members to act in the best interests of the organization. In
Hungary also, foundations are permitted to manage their funds independently, without legal
restrictions, as long as funds are used for the purpose of implementing the objectives set out
in the founding documents. Indeed, Hungary requires the board of public benefit foundations
to set its own investment regulations (although the content and form of these regulations are
not prescribed in detail in the law).

A minority of European countries defines specific restrictions relating to investments and
even requires state approval before a foundation performs a specific transaction. Greece
offers one such example. First, the law in Greece allows only a narrow range of investment
opportunities for foundation revenue. In addition, any investments made by the foundation
are subject to prior approval, allowed only at an interest rate of 5% and guaranteed by
sufficient securities. The supervisory authority (minister of finance) also determines the
terms of the loan agreement and the guarantees provided. Government approval of
investment decisions is also required in some Lander in Germany and in Austria. A major
sale of assets in Austria, for instance, is subject to approval and will be granted where the
sale does not jeopardize the realization of the purpose of the foundation.

The wisdom of placing such decision-making authority in a state official seems highly
questionable. Assume a foundation is seeking approval on the sale of real property. The
foundation sends the expert’s evaluation report, deed, and decision o
f the foundation board
to the government to approve the sale. How w ill a government official or judge be able to
determine – more effectively than the foundation board – whether the sale is proper? Such
requirements of government review and approval would seem to do little to accomplish a
legitimate state interest, and rather simply create a time-consuming process, which burdens
both the foundation and the government. For public foundations (that is, state-founded
organizations) entrusted with state “treasures”, state approval before alienation is sensible.
For private foundations, state involvement seems unwarranted.

E. International Cooperation

The Decree Law of GDF (1984) describes under which conditions foundations can engage in
international relations. This decree ‘allows’ Turkish foundations to engage in international
cooperation, open branches or representative offices and become members of foreign
foundations only upon obtaining prior authorization from the Ministry of Interior and Ministry
of Foreign Affairs. These regulations also apply to foreign foundations operating in Turkey.

The Ministry of Interior issued a circular in 9 January 2004 regarding the international
relations of foundations, which requires these requests to be processed through the
18 See “Supervision of Foundations in Europe: Post -incorporation Restrictions and Requirements”, Foundations in
Europe , Edited by Schluter, Then & Walkenhorst, Berterlsmann Foundation 2001.

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

12 All rights reserved. Not to be quoted without permission.
Department of Associations (a new unit formed to regulate associations in mid 2003, within
the Ministry of Interior).

Aside from the burden and cost this process creates for foundations, the ‘vague’ descriptions
of the regulation and subsequent circular creates confusion for the ‘applicant’ foundation. For
example, they both only refer to as ‘cooper ation’ and ‘membership’ as conditions which
require prior approval, but the word ‘grant’, ‘funding’, or any other term implying cash support
does not exist. However in practice, foundations are told that obtaining a grant or cash
support from a foreign foundation/organization constitutes ‘cooperation’ and thus requires
permission. To add more confusion, informal advice guides foundations to apply to the
Department of Associations when money is not involved and to the General Directorate of
Foundations when it is.

In short, the prior authorization itself is a burden – but the conditions under which
authorization is required, as well as the process by which this is obtained and from which
authority is vague and difficult to navigate.

Comparative Perspective

Restricting the ability of foundations to cooperate (whether in terms of information sharing or
funding) with foreign organizations is virtually unheard of in Europe. Requiring government
approval – and in some cases, actually deny ing approval – for cooperation with foreign
organizations is almost certainly a violation of the European Convention of Human Rights
(namely, Article 10). Thus, only in repressive regimes like Belarus, which are not aspiring to
join the European Union, can comparable restrictions be found.

Article 10 states:

Everyone has the right to freedom of expression. This right shall include freedom to
hold opinions and to receive and impart information and ideas without interference by
public authority and regardless of frontiers.
19

Prior authorization burdens the ability of people and organizations to “receive and impart
information and ideas … regardless of frontiers.” Any restriction on this freedom must be
measured against the strict analytical fram ework set forth by the European Court to
determine if it is ‘necessary in a democratic society’. As emphasized by the Court, “[T]he
Court must examine the question of ‘necessity’ in the light of the principles developed in its
case-law. It must determine whether there exists a pressing social need for the measures in
question and, in particular, whether the restriction complained of was ‘proportionate to the
legitimate aim pursued.’” (
Open Door and Dublin Well Woman v. Ireland (Application Nos.
14234/88 and 14235/88) 29 October 1992, para. 70) (citations omitted). Therefore,
exceptions to freedom of expression must be interpreted narrowly and can only be justified
by “imperative necessity”. (
Vereinigung Demokratischer Soldaten Oesterreichs and Gubi v.
Austria (Application No. 15153/89) 19 December 1994, para. 37). 20
19 Article 10 protection extends to foundations, for the provisions of the Convention are secured to “everyone
within the jurisdiction” of the member-states. Thus, a lega l entity, including a foundation or a foreign not-for-profit
organization, cannot be excluded from the fundamental rights of the Convention. A foundation has the right to
freedom of expression; it is not permissible for the state to stifle foundations on grounds other than those allowed
under the Convention.
20 In Open Door and Dublin Well Woman v. Ireland (Application Nos. 14234/88 and 14235/88) 29 October 1992,
the Court found an Article 10 violation when the Suprem e Court enjoined the applicant not-for-profit organizations
from provided counseling to pregnant women, including discussing abortion generally and the right of women to
travel outside of Ireland to obtain one. In
Vereinigung Demokratischer Soldaten Oesterreichs and Gubi v. Austria
(Application No. 15153/89) 19 December 1994, the Court found an Article 10 violation when the Federal Minister
of Defense denied the applicant asso ciation’s request that its published magazine (der Ingel) be distributed to

TUSEV Comparative Report on Turkish Foundation Law Provisions September 2004

13 All rights reserved. Not to be quoted without permission.

The “imperative necessity” of restricting co operation with foreign organizations seems
untenable. We know of no EU country with a comparable restriction. Indeed, in the
European context, it is only comparable to the situation in Belarus. On March 15, 2001,
Decree No. 8 of the President of the Republic of Belarus of March 12, 2001 “On Certain
Measures to Improve the Order of Receiving and Using Foreign Aid” was published. The
strategic intent of this document is apparently to impose an unprecedented level of
government control over the activities of N GOs and their financial support from foreign and
international organizations. This approach remains the subject of severe criticism by the EU
and other members of the international community.
21

One could also argue that this sort of prior authorization requirement impinges on Article 11
of the European Convention. In other words, it restricts the freedom of foundations – and
those involved with foundations – to associate with others, as protected by Article 11 of the
European Convention.

Summary

Given the rapid development of the non profit or ‘third’ sector in
Turkey, the role of
foundations and their contribution to social and economic development has become even
more pronounced. This trend is not limited only to Turkey; in Europe, foundations have been
debating the composition of a common legal framework for public benefit foundations, to
promote cross-border activity and enable their activities
22.

However, the foundation sector in Turkey is currently facing severe difficulties as a result of
the issues outlined in this report. Without more enabling laws and regulations for foundations,
this very valuable tradition and the essence of devoting ‘private wealth for public good’
stands to be significantly diminished. It is therefore essential that revised legal frameworks
enable foundations to operate within reasonable and operationally realis
tic regulations, so
that their contribution to society and public benefit can be maximized.

soldiers in the Austrian army in the same way as th e only other two military magazines published by private
associations.
21 If the goal of the authorities in restri cting international cooperation is more narrowly focused on curbing ties to
illicit organizations and the influence of international criminal activity, there are more effective ways to approach
this issue than through foundation regulation. Money laundering laws and criminal laws, for example, are
generally applicable to legal entities and targeted on spec ific problems. Restrictive requirements for foundations
will do little to solve the perceived problem (especially wh ere companies are not similarly restricted). Moreover, it
is likely that these sorts of provisio ns will almost exclusively burden law-abiding organizations, recognizing that
few entities seeking to break money laundering legislation or criminal laws would likely disclose this fact to the
government.
22 See www.efc.be for more on the Draft Framework for Public Benefit Foundations