Expropriation Risks in Turkish Energy Projects: Compensation Rights of Foreign Investors

Expropriation Risks in Turkish Energy Projects: Foreign Investor Compensation Rights in 2026

Understand expropriation risks in Turkish energy projects, including direct and indirect expropriation, compensation calculation, urgent expropriation, investment treaty claims, domestic remedies, and arbitration rights available to foreign investors in Turkey in 2026.

Foreign investors developing energy projects in Turkey may face expropriation-related risks at different stages of an investment. These risks can arise during land acquisition, construction, grid connection, licensing, transmission infrastructure development, regulatory restructuring, or the termination of public-law rights granted to the project company.

Expropriation does not always involve the formal transfer of ownership to the State. A foreign investor may also suffer substantial economic loss where regulatory measures, license cancellations, access restrictions, tariff interventions, permit revocations, or other governmental actions effectively deprive the investor of the use, control, or economic value of the investment.

For this reason, foreign investors must evaluate both Turkish domestic law and applicable international investment treaties before financing or acquiring an energy project in Turkey.

The Turkish Constitution protects the right to property and permits expropriation only where required by the public interest, in accordance with statutory procedures and upon payment of the actual value of the affected property. Article 46 also permits the establishment of administrative easements over privately owned immovable property subject to the same constitutional safeguards.

What Is Expropriation in Turkish Energy Projects?

Expropriation is the compulsory acquisition of privately owned property by the State or another authorized public entity for a public-interest purpose.

In energy projects, expropriation may affect:

• Project land
• Solar power plant sites
• Wind turbine locations
• Hydroelectric power facilities
• Substations and switchyards
• Electricity transmission corridors
• Natural gas pipelines
• Storage facilities
• Access roads
• Administrative easements
• Surface rights
• Long-term land-use rights
• Project-related buildings and infrastructure

The principal domestic legislation is Expropriation Law No. 2942. The law regulates the acquisition of immovable property, the establishment of easement rights, the calculation of compensation, registration in the name of the administration, the recovery of unused property, and disputes arising from expropriation procedures.

Why Are Energy Projects Particularly Exposed to Expropriation Risks?

Energy infrastructure frequently requires large areas of land and permanent access to strategically located sites. Transmission lines, pipelines, wind farms, hydroelectric facilities, substations, and renewable energy zones may affect numerous privately owned parcels.

A project may therefore depend on:

• Formal expropriation of privately owned land
• Partial expropriation of a parcel
• Establishment of an administrative easement
• Urgent expropriation
• Temporary occupation
• Restrictions imposed through zoning plans
• Access rights for transmission infrastructure
• Public acquisition of land required for grid connection

Current renewable energy project documentation also confirms that urgent expropriation may be used for areas required for switchyards and energy transmission lines. For example, the 2026 draft specifications for an offshore wind renewable energy zone expressly contemplate urgent expropriation in accordance with applicable legislation.

Direct Expropriation

Direct expropriation occurs when ownership of property is formally transferred to the State or an authorized public entity.

Examples include:

• Compulsory acquisition of land used by a power plant
• Acquisition of an investor-owned substation
• Transfer of land required for a transmission line
• Acquisition of project infrastructure following a public-interest decision
• Formal seizure of assets under a statutory expropriation procedure

Direct expropriation is generally identifiable because the legal title to the property changes.

A lawful direct expropriation normally requires:

1. A genuine public-interest purpose
2. A clear legal basis
3. Compliance with procedural safeguards
4. Non-discriminatory treatment
5. Payment of appropriate compensation

Indirect Expropriation

Indirect expropriation is more complex. It may occur where the investor formally retains ownership, but governmental measures substantially deprive the investment of its use, value, control, or expected economic benefit.

Possible examples in the energy sector include:

• Arbitrary cancellation of an electricity generation license
• Revocation of essential permits without sufficient legal justification
• Permanent denial of access to the project site
• Discriminatory refusal of grid connection
• Governmental interference making the project commercially unusable
• Forced transfer of contractual or project rights
• Destruction of the economic value of a concession
• Prolonged regulatory measures preventing operation
• Discriminatory measures targeting a foreign-owned energy company
• State conduct effectively preventing the investor from receiving project revenues

Not every regulatory change constitutes indirect expropriation. States retain the authority to regulate energy markets, environmental protection, licensing, public safety, competition, and national infrastructure.

The main issue is whether the governmental measure is a legitimate and proportionate regulation or whether it effectively destroys the investment without adequate compensation.

Regulatory Measures Versus Indirect Expropriation

Energy markets are heavily regulated. Foreign investors cannot generally claim compensation merely because:

• Tariffs change
• Technical standards become stricter
• Environmental requirements increase
• Grid codes are revised
• Licensing rules are amended
• Additional compliance obligations are imposed
• Market conditions become less profitable

However, an international claim may become possible where a measure is:

• Arbitrary
• Discriminatory
• Disproportionate
• Targeted at a specific investor
• Contrary to binding State assurances
• Fundamentally inconsistent with the investor’s acquired rights
• Equivalent in effect to a substantial deprivation of the investment

The assessment depends on the wording of the relevant bilateral investment treaty, the seriousness and duration of the interference, the investor’s legitimate expectations, and the public-interest justification relied upon by the State.

Protection Under the Turkish Constitution

Article 35 of the Turkish Constitution protects the right to own and inherit property. Property rights may be restricted only by law and for a public-interest purpose.

Article 46 specifically regulates expropriation. It provides that the State and public corporations may expropriate privately owned immovable property or establish administrative easements where required by the public interest, provided that the actual compensation is paid in accordance with the law.

The Turkish Constitutional Court has repeatedly emphasized that payment of the actual value of the property is a constitutional safeguard and a requirement of proportionality.

Foreign Direct Investment Protection

Foreign investors are generally entitled to the same legal protection as domestic investors under Turkey’s foreign direct investment framework.

Official energy-sector investor guidance identifies equal treatment, protection against expropriation, international arbitration, and the transfer of investment proceeds as important protections available to foreign investors.

This does not mean that foreign-owned property can never be expropriated. It means that expropriation must comply with the law, must serve a legitimate public-interest objective, and must be accompanied by appropriate compensation.

Urgent Expropriation in Energy Projects

Urgent expropriation allows possession of the property to be obtained through an accelerated procedure before the ordinary expropriation process has been fully completed.

It is frequently relevant to:

• Electricity transmission lines
• Substations
• Pipelines
• Renewable energy zones
• Strategic generation projects
• Emergency infrastructure
• Projects considered essential to energy security

Urgent expropriation does not eliminate the property owner’s right to challenge the amount of compensation or procedural defects.

Foreign investors and landowners should examine:

• Whether the urgent procedure has a valid statutory basis
• Whether a proper public-interest decision exists
• Whether the affected parcels are correctly identified
• Whether the project genuinely requires urgent possession
• Whether the deposited provisional amount reflects the actual value
• Whether procedural notifications were properly served

Expropriation of Land for the Benefit of Private Energy Companies

Although expropriation is exercised by public authorities, land may in certain circumstances be acquired for projects implemented by private-law entities that possess statutory authorization or hold the relevant energy license.

This is especially important for:

• Licensed electricity generation companies
• Natural gas infrastructure operators
• Electricity transmission and distribution projects
• Renewable energy projects
• Public-private partnership structures
• Energy concession projects

The involvement of a private project company does not remove the requirement that the acquisition serve a genuine public-interest purpose.

Administrative Easements

A full transfer of ownership may not always be necessary. An administrative easement may instead be established over part of the property.

Administrative easements are common for:

• Overhead electricity lines
• Underground cables
• Pipelines
• Access routes
• Safety zones
• Operation and maintenance corridors

The owner remains the legal owner of the property, but the property becomes subject to restrictions benefiting the energy infrastructure.

Compensation should reflect the reduction in the property’s value resulting from the easement, including the effect on the remaining usable area.

How Is Expropriation Compensation Calculated?

The constitutional principle is that the actual value of the property must be paid.

Depending on the nature of the property and the project, valuation may consider:

• Market value
• Location
• Zoning status
• Current use
• Comparable sales
• Agricultural income
• Development potential
• Existing structures
• Trees and permanent improvements
• Commercial characteristics
• Loss of value affecting the remaining parcel
• Restrictions created by an easement
• Objective factors influencing the property’s value

Expert evidence plays a critical role. An inadequate or technically defective valuation report may substantially reduce the amount awarded unless it is challenged in time.

Can Future Energy Project Profits Be Claimed?

Domestic expropriation compensation for land is generally calculated according to statutory valuation principles rather than the investor’s entire projected profit from the energy project.

However, in an investment treaty arbitration, the damages analysis may be broader where unlawful State conduct has destroyed or substantially impaired an operating investment.

Depending on the circumstances, a foreign investor may claim:

• Fair market value of the investment
• Value of equity interests
• Lost profits
• Sunk development costs
• Financing costs
• Loss of contractual rights
• Interest
• Arbitration and legal costs

Claims based on future profits are more difficult where the project is at an early development stage, lacks essential permits, has not secured financing, or has no reliable operating history.

Compensation for Partial Expropriation

Where only part of a parcel is expropriated, the remaining section may lose value.

Examples include:

• A transmission line dividing agricultural land
• Loss of road access
• Restrictions on construction
• Fragmentation of a commercial site
• Safety zones preventing effective use
• Reduced development potential
• Loss of connection between project areas

The investor or landowner may seek compensation for the decrease in value of the remaining property, provided that the loss is properly documented and demonstrated through expert analysis.

Confiscation Without Formal Expropriation

A public authority may sometimes occupy, use, restrict, or effectively take control of private property without completing the statutory expropriation process.

This is commonly described as confiscation without expropriation.

The Turkish Constitutional Court has stated that interference terminating ownership must be based on law and that the administration should acquire the property through the expropriation procedure required by Article 46 of the Constitution and Law No. 2942.

Claims may arise where:

• Transmission infrastructure is installed without completed expropriation
• Land is physically occupied without payment
• Access to the property is permanently prevented
• A public facility is constructed on private land
• An easement is exercised without lawful establishment
• The administration delays formal acquisition for an excessive period

Domestic Legal Remedies

Depending on the disputed measure, available remedies may include:

• An action challenging the administrative decision
• An action for determination or increase of expropriation compensation
• A claim arising from confiscation without expropriation
• An action for annulment of an unlawful public-interest decision
• A claim for damages against the administration
• A challenge concerning title registration
• Constitutional Court individual application
• Application to the European Court of Human Rights after exhaustion of domestic remedies

The competent court and filing deadline depend on the nature of the disputed act. Some claims fall within the jurisdiction of civil courts, while challenges to administrative measures may belong to administrative courts.

Foreign investors must therefore classify the dispute correctly before filing proceedings.

Investment Treaty Protection for Foreign Investors

Foreign investors may have additional rights under a bilateral investment treaty concluded between Turkey and the investor’s home State.

Treaties commonly protect against:

• Unlawful expropriation
• Indirect expropriation
• Discrimination
• Arbitrary State conduct
• Unfair and inequitable treatment
• Denial of justice
• Restrictions on the transfer of funds
• Failure to provide full protection and security

The existence and scope of protection depend on:

• The investor’s nationality
• The corporate ownership structure
• The definition of investment
• The wording of the applicable treaty
• The date of the investment
• Any denial-of-benefits provision
• Compliance with local law
• Dispute resolution requirements

Requirements for Lawful Expropriation Under Investment Treaties

Many investment treaties require that expropriation:

• Serve a public purpose
• Be carried out in a non-discriminatory manner
• Follow due process
• Be accompanied by prompt, adequate, and effective compensation

A failure to satisfy these conditions may result in an international claim against the State.

Can Foreign Investors Start International Arbitration?

Potentially, yes.

A foreign investor may have access to international arbitration where:

• An applicable bilateral investment treaty contains investor-State arbitration consent
• An investment agreement includes an arbitration clause
• A concession agreement permits arbitration
• The dispute falls within the scope of the ICSID Convention
• The parties have agreed to ICC, UNCITRAL, or another arbitration mechanism

ICSID maintains a public database of investment treaties and investor-State cases, including proceedings involving Turkey.

Before commencing arbitration, the investor must check:

• Cooling-off or negotiation periods
• Notice-of-dispute requirements
• Fork-in-the-road clauses
• Waiver requirements
• Limitation periods
• Local litigation requirements
• Nationality and ownership conditions
• The date on which the alleged treaty breach occurred

Domestic Litigation or Investment Arbitration?

Domestic litigation and investment arbitration serve different purposes.

Domestic proceedings may challenge:

• The validity of an expropriation decision
• The amount of compensation
• An administrative penalty
• A license cancellation
• A zoning measure
• A title registration issue

Investment arbitration may address whether State conduct breached an international treaty.

The same factual situation may therefore produce both domestic and international legal issues. However, treaty clauses may restrict parallel proceedings. Starting a domestic case without reviewing the applicable investment treaty may unintentionally affect the investor’s arbitration rights.

Compensation in Investment Arbitration

Investment arbitration tribunals may assess damages using methods such as:

• Fair market value
• Discounted cash flow
• Comparable transactions
• Replacement cost
• Book value
• Sunk costs
• Asset-based valuation

The appropriate method depends on whether the project was operational, profitable, sufficiently developed, and capable of producing reliable future cash flows.

Tribunals may also award:

• Pre-award interest
• Post-award interest
• Legal fees
• Expert costs
• Arbitration expenses

Evidence Foreign Investors Should Preserve

Foreign investors should preserve evidence from the earliest stage of the project.

Important documents include:

• Investment agreements
• Share purchase agreements
• Licenses
• Preliminary licenses
• Concession contracts
• Land acquisition documents
• Construction permits
• Grid connection agreements
• EPC agreements
• Government correspondence
• Regulatory approvals
• Financing documents
• Feasibility studies
• Financial models
• Valuation reports
• Board resolutions
• Records of State assurances
• Evidence of discriminatory treatment
• Notices sent to public authorities
• Expert reports
• Documents showing project losses

The absence of contemporaneous records can make both domestic compensation proceedings and international arbitration significantly more difficult.

Risk Mitigation Before Investing

Foreign investors can reduce expropriation risks by:

• Structuring the investment through a jurisdiction with an effective investment treaty
• Conducting title and zoning due diligence
• Reviewing all license and permit conditions
• Confirming land-use and easement rights
• Examining public-interest and expropriation plans
• Negotiating stabilization and change-in-law clauses
• Including international arbitration clauses
• Recording governmental assurances in writing
• Obtaining political risk insurance
• Monitoring regulatory developments
• Maintaining complete evidence of capital contributions
• Preparing an early dispute-response strategy

Treaty structuring should be completed before a dispute becomes foreseeable. Restructuring after a dispute has arisen may not create valid treaty protection.

2026 Legal and Regulatory Outlook

Foreign investors should closely monitor regulatory developments affecting:

• Renewable energy zones
• Offshore wind projects
• Electricity transmission infrastructure
• Energy storage facilities
• Grid expansion
• Natural gas networks
• Licensing and preliminary licensing
• Environmental approvals
• Carbon market regulation
• Public land allocation
• Strategic energy infrastructure

The Ministry of Energy and Natural Resources continues to pursue significant renewable energy expansion, and current project documentation shows that land acquisition and urgent expropriation remain relevant to new generation and transmission investments.

A 2026 Constitutional Court decision also reaffirmed that payment of the real value of expropriated property is an essential safeguard of the constitutional right to property.

Frequently Asked Questions

1. Can the Turkish State expropriate a foreign-owned energy project?

Yes. Foreign ownership does not prevent lawful expropriation. However, the measure must have a legal basis, serve the public interest, comply with procedural safeguards, and provide appropriate compensation.

2. What is indirect expropriation?

Indirect expropriation occurs where the investor retains formal ownership but State measures substantially deprive the investment of its use, control, value, or economic benefit.

3. Does license cancellation amount to expropriation?

Not automatically. A lawful cancellation based on a serious regulatory violation may not constitute expropriation. An arbitrary, discriminatory, or disproportionate cancellation that destroys the investment may support a treaty claim.

4. How is expropriation compensation calculated in Turkey?

Compensation is based on the actual value of the affected property and the statutory valuation principles applicable to the type, location, use, and characteristics of the property.

5. Can a foreign investor challenge urgent expropriation?

Yes. The investor may challenge procedural defects, the legal basis of the decision, and the amount of compensation, depending on the circumstances and applicable deadlines.

6. Can lost profits be recovered?

Lost profits may be recoverable in an international investment claim where they are proven with reasonable certainty. They are more difficult to establish for early-stage or speculative projects.

7. Can foreign investors use ICSID arbitration?

They may be able to do so where Turkey and the investor’s home State are parties to the ICSID Convention and an applicable investment treaty or agreement provides valid consent to ICSID arbitration.

8. Can domestic court proceedings affect treaty arbitration?

Yes. Fork-in-the-road, waiver, or election-of-remedies clauses may restrict parallel proceedings. Treaty advice should be obtained before commencing domestic litigation.

9. What should an investor do after receiving an expropriation notice?

The investor should immediately review deadlines, preserve evidence, obtain an independent valuation, examine applicable investment treaties, and avoid signing settlement or waiver documents without legal advice.

10. Can compensation be claimed for an administrative easement?

Yes. Compensation may be available for the reduction in value caused by transmission lines, pipelines, access rights, safety corridors, or other administrative easements.

Legal Support for Foreign Energy Investors

Expropriation disputes in Turkey require coordinated knowledge of energy regulation, property law, administrative litigation, valuation, and international investment arbitration. Early legal intervention can protect procedural rights, preserve treaty claims, strengthen compensation evidence, and prevent irreversible loss.

Fırat Fesih Kaya Law Office provides legal assistance to foreign investors, energy companies, lenders, project developers, shareholders, EPC contractors, and infrastructure operators facing direct expropriation, indirect expropriation, urgent expropriation, license interference, administrative restrictions, and investment treaty disputes.

For a legal assessment tailored to your energy investment and compensation rights, you may contact our office. Managing the process with an experienced energy and investment lawyer can prevent loss of rights and improve the effectiveness of domestic or international remedies.

Phone: +90 312 434 22 22
Mobile Phone: +90 532 769 22 22
Email Address: info@firatfesihkaya.av.tr
Office Address: Mevlana Boulevard No: 221, Yıldırım Tower No: 148, 06520 Balgat, Çankaya, Ankara, Turkey

Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Expropriation, compensation, and investment treaty rights must be assessed according to the specific facts, applicable legislation, relevant treaty provisions, and procedural deadlines of each case.