Contracts which the administration concludes in the exercise of its superior and privileged powers, whose subject matter is the performance of a public service and whose effects arise in the field of administrative law, are termed "administrative contracts". Because each of these contracts is directed at regulating a different field of public service, legal consequences and disputes which differ markedly from one another may arise once they have been concluded.
Administrative contracts are formed by following particular statutory procedures, and there are procedural rules which must be observed before the contract is made. Where the administration fails to observe those rules altogether, or applies them incompletely or incorrectly, an action may be brought asserting the unlawfulness of the contract.
The Concept of an Administrative Contract
The administration, which is obliged to operate in fields as diverse as electricity, construction and public works, purchases services in matters requiring expertise by concluding administrative contracts founded on the mutual and free will of the parties. Although these contracts are generally structured around the reciprocal rights and obligations of the parties, the fact that the administration exercises public power in this relationship cannot be disregarded.
Elements of an Administrative Contract
Not every contract to which the administration is a party is regarded as an administrative contract. For a contract to attract that characterisation, the following three essential elements must be present together:
- One of the parties must necessarily be the administration.
- The contract must regulate a field relating to the performance of a public service.
- The administration must have been afforded superior rights and privileges derived from public power.
Types of Administrative Contract
The principal types of administrative contract encountered in practice are the following: the public service concession contract; the joint stewardship contract; administrative service contracts; tax-farming contracts; contracts whose subject matter is the exploitation of subterranean and surface resources; forestry management contracts; and public borrowing contracts.
Remedies Available in Disputes
The central provision on the subject appears in Administrative Procedure Act No. 2577, in Article 2, which bears the side heading "Types of Administrative Action and the Limits of Administrative Judicial Power", at sub-paragraph "c":
Administrative Procedure Act, Art. 2(1)(c)
"Actions concerning disputes arising between the parties out of any administrative contract made for the performance of one of the public services, with the exception of disputes arising from concession specifications and contracts for which recourse to arbitration is provided."
Actions falling within that definition are subject to the characteristics and conditions particular to administrative actions.
It follows that a full remedy action may be brought in the administrative courts against such contracts, seeking damages on the ground of an infringement of rights. An action for damages directed against the administration is the type of action to which persons whose rights have been impaired by acts or operations of the administration have recourse.
The line of case law maintained by the Council of State over many years also makes it possible to bring an action for annulment against these contracts. Actions for annulment are brought by persons whose interests are impaired by the act in question, on the ground that the act is unlawful in respect of one or more of the elements of competence, form, cause, subject matter and purpose. Objections to administrative acts and the action for annulment form a subject which merits detailed examination in its own right.
At What Stage Can an Action Be Brought?
Administrative contracts are formed by following particular statutory procedures, and there are procedural rules which must be observed before signature. The administration’s failure to apply those rules at all, or its incomplete or incorrect application of them, opens the way to an action asserting the unlawfulness of the contract. Actions brought on the allegation that the tender was conducted unlawfully fall into this group and are heard in the administrative courts.
Unlawfulness relating to the contract may also be asserted, and an action brought, after signature. Moreover, such an action may be brought not only by the parties to the contract but also by persons who benefit from the public service.
Determining the Court That Will Hear the Dispute
Since administrative contracts have the character of bilateral administrative acts, the administrative courts have jurisdiction in actions brought against them. The following distinction must nonetheless be drawn:
- Administrative actions arising from concession specifications and contracts relating to public services for which no recourse to arbitration is provided are heard by the Council of State sitting as a court of first instance.
- Administrative actions arising from concession specifications and contracts which relate to public services and for which recourse to arbitration is provided are resolved by arbitration pursuant to Article 125(1) of the Constitution.
- In respect of any administrative contract made for the purpose of performing one of the public services, other than concession specifications and contracts for which recourse to arbitration is provided, actions concerning disputes arising between the parties are regarded as administrative actions and are heard before the administrative courts.
Regard must nonetheless also be had to the following assessment made by the 10th Chamber of the Council of State in its judgment in Case No. 2012/8825, Decision No. 2015/5399:
Council of State, 10th Chamber, Case No. 2012/8825, Decision No. 2015/5399, 30.11.2015
"Whereas the acts falling within the process leading up to the signature of a private law contract with the administration are, by virtue of their character as administrative acts, subject to review by the administrative courts, the hearing and resolution of disputes arising from acts performed at the stages following the signature of the contract belongs to the ordinary courts, unless those acts are of a nature severable from the contract."
The court with territorial jurisdiction in these actions is the court for the place in which the administrative authority that concluded the contract in dispute is situated. Actions falling within the remit of the Council of State as a court of first instance pursuant to Article 24 of the Council of State Act are brought directly before it.
The Public Service Concession Contract
A public service concession contract is a long-term contract whose subject matter is the transfer to a private person of the establishment and/or operation of a public service, and which is made in order to secure the performance of that service. Its purpose is to confer on the person undertaking the service a set of powers derived from public power. These contracts also secure the administration’s power of supervision and oversight, so as to ensure that the service is performed in a regular and stable manner.
The constitutional basis of the institution appears in Article 47 of the Constitution of the Republic of Türkiye:
Constitution of the Republic of Türkiye, Art. 47
"It shall be determined by law which of the investments and services carried out by the State, by public economic enterprises and by other public legal persons may be assigned to or transferred to real or legal persons by means of private law contracts."
When concession specifications and contracts relating to public services are referred to it, the Council of State delivers its opinion within a period of two months. Sub-paragraph (d) of the first paragraph of Article 25 of the Council of State Act likewise numbers the delivery of such an opinion among the duties of the Council of State. Concession contracts concluded without that opinion having been obtained are, in practice, the source of a great many disputes.
The rule requiring the Council of State to deliver an opinion on concession specifications and contracts is treated in some decisions as mandatory, and may lead to the annulment of a contract concluded without an opinion having been obtained. In other decisions, by contrast, the function of "delivering an opinion" is construed as "consultation", and, not being regarded as mandatory, does not result in the annulment of the contract.
Because the subject matter of concession contracts directly concerns the public service, public property and the public interest, the administration, which is charged with performing the service and protecting that interest, is afforded the power to make unilateral amendments to the regulatory provisions of the contract. That same power may not, however, be exercised in respect of the financial provisions, where the contractual aspect of the agreement predominates. Among the matters in which this boundary is most frequently in issue are advances paid to the contracting party, credit guarantees, monopoly rights and exemption from certain taxes and charges. A unilateral amendment to the tariffs may likewise impair the contractual aspect of the agreement and may therefore give rise to an action in the administrative courts.
Frequently Asked Questions
Is representation by a lawyer mandatory before the administrative court?
Turkish law allows parties to defend and represent themselves in person before the courts; save for a few limited exceptions, representation by counsel is not mandatory. No such requirement is laid down for the administrative courts either. However, the complexity of administrative law legislation and the short and strict nature of the periods under the Administrative Procedure Act may, where the process is conducted by persons who are not lawyers, give rise to errors of procedure and of substance that are difficult to remedy. For that reason it is advisable to seek the support of lawyers practising in the field of administrative law before any step is taken.
What are the essential features of administrative contracts?
In these contracts one of the parties must necessarily be the administration; accordingly, one party may be the administration and the other a person governed by private law, but it is equally possible for both parties to be the administration. The principal purpose in concluding the contract is the performance of a public service. Because one of the parties is the administration, there can be no question of equality between the parties; contracts of this kind confer more extensive powers on the administration.
What is a tax-farming contract?
A contract under which a service is performed for the administration by a person in return for a payment, or which is made for the delivery of a particular thing, is called a tax-farming contract; the other party to the contract is known as the tax farmer. By way of example, the collection of property tax is a duty of the municipalities. Some municipalities entrust the whole of these services, from assessment through to collection, to private persons, and the contracts made for that transfer are in the nature of tax farming.
Can an action for annulment be brought against administrative contracts?
The subject matter of an action for annulment is administrative acts. Recourse to an action for annulment is therefore not available in respect of administrative operations or administrative contracts.
Where are disputes arising from private law contracts heard?
Contracts which the administration concludes subject to the rules of private law fall into this category. Disputes arising from them are resolved in the ordinary courts, and the provisions of private law are applied to the dispute.
What should a person harmed by an act or operation of the administration do?
A person who suffers loss on account of an act or operation of the administration seeks compensation for that loss by bringing an action against the administration; that action is termed a full remedy action.
Into which category do build-operate-transfer contracts fall?
Contracts made under the build-operate-transfer model are regarded as public service concession contracts.
The Independent Legal Assessment
In these disputes the first difficulty generally relates not to the merits but to the determination of the judicial avenue. Whereas pre-contractual acts may be reviewed in the administrative courts within the framework of the doctrine of severable acts, the judicial order to which disputes arising after signature must go varies according to the severability of the act. Drawing that distinction incorrectly at the outset produces a serious loss of time, together with a decision declining jurisdiction.
Where a dispute arises, it is advisable that the following points be considered:
- Examining whether the contract may be regarded as an administrative contract by reference to the three essential elements
- Establishing whether the text contains an arbitration clause and what effect that has on the rules of jurisdiction
- Bringing an action for annulment within the period against severable acts performed during the tender process
- Investigating whether the opinion of the Council of State was obtained in the case of contracts in the nature of a concession
- Distinguishing whether the unilateral amendment relates to the regulatory provisions or to the financial provisions
- Establishing the infringement of rights and the causal link by reference to concrete evidence for the purposes of the claim for damages
Independent Legal provides advisory services and conducts litigation in disputes arising from public procurement and administrative contracts, from pre-contractual review through to the conduct of the proceedings.
This briefing note is intended for general information only; given the detailed structure of the rules governing administrative judicial proceedings, it is advisable to obtain legal support before any step is taken.