Employment of Expatriates in FDI by Turkey and France Comparison Study
By Helene Bidault
ADMD Law Office, Istanbul TURKEY
Foreign Direct Investments (FDI) are defined by the Organisation for Economic Co-operation and Development (OECD) as an operation by which an investor acquires a lasting interest and a significant influence in the management of a firm that is situated abroad. They have beenconsidered crucial for the economic growth of a country in the past two decades.The purpose of this article is to compare the difficulties met by a French company willing to invest in Turkey and a Turkish company willing to invest in France, as regards the work permits and the visa for its expatriates.
Indeed, the question of the expatriates is very often a key issue in the decision for a firm to invest in another country, as they are reducing the risks attached to the operation by employing people that are already working with them. As a consequence, strong restrictions to the granting of employment permit for foreigners by either France or Turkey could result in investors being less inclined to establish themselves in the country.
Recently, Turkey has been trying to improve its attractiveness for FDI by promoting changes within its legal framework. These alterations have been made possible by the coordination of two advisory bodies: the Coordination Council for the Improvement of Investment Environment (YOIKK) and the Investment Advisory Council of Turkey (IAC). The former aims at encouraging the changes from the government, whereas the latter’s role is to receive recommendations from the part of major transnational firms and international organisations.
First of all, the 2003 Foreign Direct Investment Law (Law number 4875) highly improved Turkey’s ranking in FDI receiving countries by establishing freedom to invest and granted equal treatment to foreign and Turkish firms, which have thus the same rights and obligations. As a result, a French firm could easily create a subsidiary in Turkey, without having to overcome tougher requirements than native Turkish firms.
More to the core of our topic is the Law on Work Permits of Foreigners (Law No. 4817 dated February 2003, “the Law”) whose purpose was to clarify the previously scattered legislation, although it did not abolish all the existing restrictions to the employment of foreign people in Turkey. Indeed, the Article 15 of the Directive on the Employment of Foreign Personnel in Foreign Direct Investment reminds that the “accomplishment of an investment subject toLaw No. 4875 does not necessarily require the granting of work permit to foreign personnel”.
The general rule remains that nationals of foreign countries have to obtain three documents in order to be able to start working in Turkey: first, a work permit from the Ministry of Labour and Social Security (“the Ministry”), then, an employment visa so as to enter the country, and then, within a month after the arrival in Turkey, but prior to the beginning of the work, a residence permit to be obtained from the local police authority. The work permit we are going to develop the outcomes in the rest of the section is only effective if the two other documents are granted to the worker.
In the case of a French company requesting one of her French employees to come to Turkey so as to work in its local subsidiary, an exceptional work permit can be issued by the Ministry on the grounds of the employee being a European Union (“EU”) member state national. Indeed, Article 8 of the law provides for a more flexible work permit for EU citizens and their spouses and children, as regards the validity term of the work permit. However, other restrictions defined in Article 14 of the Law are applicable in the same way as to non-exceptional work permits. The more important of these are:
- “The fact that the status in the business market and the developments in the working life and sectoral and economical conjuncture changes related to employment are not suitable for granting a work permit,
- The fact that any person is found for the work applied for, featuring the same qualities to perform that work, within 4 weeks within the country”.
The response for this type of work permit has to be given by the Ministry within ninety days of the application. In view of the above, and even though the Law has considerably improved the situation, the Turkish authorities are still showing a certain form of protectionism in their tackling the issue of foreign workers in the framework of FDI.
Nevertheless, in the framework of its efforts towards Foreign Direct Investment enhancement, the Ministry has implemented the Directive on the Employment of Foreign Personnel in Foreign Direct Investment (“the Directive”), which creates a special procedure for “key foreign personnel”. The latter are defined by Article 4 of the directive, as:
“The employees employed by the company established in Turkey as a legal entity having at least one of the following features;
a) Person who holds a position as; company shareholder, Board chairman, Board member, general manager, assistant general manager, company manager, assistant company manager or a similar position, who is carrying out at least one of the following duties:
- Employed at top management or executive position of the company,
- Direct the whole or a part of the company
- Audit or control the works of company auditors, administrative or technical staff of the company,
- Recruit personnel to the company or to dismiss the existing personnel or to make proposals on these issues,
b) Person who has expertise of fundamental nature on the services, research equipment, techniques or administration of the company,
c) Regarding liaison offices, maximum one person to be equipped with a power of attorney issued by the main company abroad”.
Moreover, these “key personnel” have to be employed by a firm corresponding to the particular conditions of the Directive, which are:
“a) The turnover of the previous year of the company or the branch office is at least TRL 30 trillion, provided that the total shares owned by foreign shareholders is at least TRL 400 billion,
b) The amount of exports realized by the company or the branch office during the previous year is at least USD 1 million, provided that the total shares owned by foreign shareholders is at least TRL 400 billion,
c) At least 250 personnel that are registered at the Social Security Authority have been employed by the company or the branch office during the previous year, provided that the total shares owned by foreign shareholders is at least TRL 400 billion,
d) In the event that the company or the branch office is yet to make investments, the projected fixed investment amount is at least TRL 10 trillion,
e) The company has at least one foreign direct investment besides the country its head office is located.”
The application for a work permit made by such “key personnel” has to be reviewed by the Ministry within fifteen days of having reached it, provided it is completed and if no requested document is missing. This measure significantly reduces the length of the procedures that a French firm would have to overcome to invest in Turkey, considering in addition the fact that with the new laws, a Turkish company can be established in one day, and allows it to transfer the fundamental individuals of its managing team without much delay. This is one of the reasons why the FDI receiving rate of Turkey has so much improved lately, following the 2003 legislations.
In the case of France, and although the EU Visa Code came into effect on the fifth of April this year, long-term visa, such as employment visa remain at the discretion of the various member states. As a result, the dispositions regarding the issuance of work visa for a Turkish firm’s employees sent to its French subsidiary can be found in the French Code du Travail (Working Code, “CT”) and in the Code de l’entrée et du séjour des étrangers et du droitd’asile (Foreigner’s entrance and residence and Asylum seeker’s Code, “CESEDA”).
To start working in France, a Turkish national must be in possession of the same three documents as are requested in Turkey: work permit, employment visa, and residence permit. The procedure is, however, a little different from Turkey’s.
According to the CT, it is the responsibility of the employer to fill in the application for a work permit for its expatriates, whereas in Turkey both the employer and the employee have to submit documents in a coordinated effort. In France, the application has to be made to the prefecture of the department where the employment is to take place. The review must befall within two month of the application. However, in the absence of any response from the authorities, it is to be assumed that the application has not been successful.
Like it is the case in Turkey, France imposes restrictions to the employment of foreigners. Indeed, the article R5221-2 of the CT provides that the prefecture has to take various criteria into account when reviewing the application for a work permit. Among these, the most important are:
“The situation of employment in the profession and geographic zone for which the application is made, considering the specificities required for the position and the researches already accomplished by the employer with the public bodies in charge with the public service of employment to recruit a candidate already present in the labour market“.
By these provisions of the law, France seeks to protect its nationals, especially in regions or economic sectors with a high level of unemployment. On top of these criteria, requirements regarding the respect of the minimum wages legislation effective in the country are also imposed in the review of the application.
If the work permit is granted to the Turkish employee, its file is transmitted to the local Office Français de l’Immigration et de l’Intégration (French agency in charge of migration and welcoming of foreign people, “OFII”), that will then pass it on to the Turkish consulate for the establishment of the employment visa. The higher graduated the Turkish applicant is, the more chances he has to see his application accepted.
The OFII is also in charge of scheduling the medical examination the Turkish has to go through before he can be granted the residence permit. This examination is designed to ascertain that the individual does not carry a disease threatening public health (such as, for instance, tuberculosis). There is no such medical examination in the Turkish procedure.
Finally, if the Turkish national wishes to work in France for a long time, he has, in order to be granted a long-term residence permit, to prove a sufficient knowledge of the French language. He can do so by any means, by confirming he possesses the Initial Diploma of French Language (DILF) or by successfully completing a fifteen-minutes test. Turkey does not impose such language requirements for 3 or 5 years work and residence permit, which can be renewed without limit. However, permanent work and residence permit, as well as citizenship requires knowledge of the Turkish language
The French approach of the granting of visa and work permit is slightly different from the Turkish one. Indeed, if Turkey has relaxed its work permit rules so as to attract more FDI, France keeps being concerned by the way the foreign workers can be assimilated into French society. However, both countries try and protect their nationals from unemployment and favour the entrance of highly qualified foreigners, either through the “key personnel” or by granting more easily a work permit to highly graduated individual.
The eventuality of Turkey’s adhesion to the European Union would of course simplify greatly the sending of expatriates through FDI between France and Turkey, as free movement of people, goods, and services would then be implemented in the two countries. As a consequence, the expatriates would be exempted from work permit, employment visa and residence permit requirements. In line with these prospective changes, the Turkish Law On Work Permits Of Foreigner already goes a long way towards accommodating EU law by making provisions for “the foreigners held exempt from work permits under reciprocity principles, international law and European Union law”.
The content of this article isintended to provide a general guide to the subjectmatter. Specialist advice should be sought about your specific circumstances.