Recent Development

The decision of the Constitutional Court of the Republic of Türkiye (“Constitutional Court”) file no. 2024/24, decision no. 2025/164 dated 22.07.2025 (“Decision”) was published in the Official Gazette dated 1 December 2025 No. 33094. The Constitutional Court ruled that Article 1 of the Law on Legal Interest and Default Interest No. 3095 (“Law”), which regulates the statutory interest rate, was unconstitutional regarding “non-contractual debt relations” and annulled it.

The Rule Subject to Annulment

Article 1 of the Law, which was the subject of the annulment request, stipulates that in cases where interest payment is required under the Code of Obligations and the Commercial Code but the amount has not been determined by contract, the payment shall be made based on an annual interest rate of 12%.

The relevant article also authorizes the President to determine this rate on a monthly basis, to reduce it to 10%, or to increase it by up to one time (i.e., double it). In current practice, this authority has been exercised, and the statutory interest rate is applied as 24% annually.

Background

In a case brought before the Kahramanmaraş 3rd Administrative Court regarding a request for compensation for damages suffered due to the destruction of immovable property as a result of an earthquake, the court concluded that the contested rule was unconstitutional and applied to the Constitutional Court for its annulment.

The court argued that the applicable statutory interest rate remained very low in the face of inflation, thereby violating the right to property and the principle of the rule of law. The application also highlighted that the significant difference between inflation rates and interest rates creates a disproportionate burden on the creditor and causes inequality to the detriment of citizens, considering the high interest rates applied to public receivables.

What Does the Decision Say?

In its Decision, the Constitutional Court made the following assessments within the scope of the right to property and the right to an effective remedy:

• Receivables as Property: The Constitutional Court stated that interest receivables and principal receivables constitute property within the scope of the right to property regulated in the Constitution. It emphasized that the state, within the scope of its positive obligations, must develop mechanisms to compensate for the depreciation in the value of money during inflationary periods.
• Imbalance between Interest and Inflation: The Decision pointed out that in cases where inflation, deposit interest rates, and government bond yields are far above the statutory interest rate, the debtor gains a financial advantage by avoiding paying the debt. It was stated that this situation leads to the erosion of the purchasing power of money by the time the creditor receives the payment, resulting in a violation of the right to property.
• Lack of an Effective Compensation Mechanism: The Constitutional Court identified that although the Law authorizes the President to increase the interest rate by up to one time (to 24%), even this rate remains insufficient under current economic conditions. The Constitutional Court concluded that there is no effective legal remedy in the legal system to compensate for the loss of value of the receivable against inflation.

Consequently, the Constitutional Court ruled that the contested rule imposed a disproportionate restriction on fundamental rights and violated Article 35 (Right to Property) and Article 40 (Right to an Effective Remedy) of the Constitution. Therefore, the rule was annulled solely regarding “non-contractual debt relations” (such as debts arising from torts, unjust enrichment, or administrative actions).

It should be emphasized that, since this annulment decision covers only Article 1 of the Law, it does not affect the commercial default interest rate (Article 2 of the Law) applied in commercial transactions and determined according to the Central Bank of the Republic of Türkiye (CBRT) advance interest rate.

Dissenting Opinion

The Decision was adopted by a majority of votes, with two members casting dissenting votes. The dissenting opinion argued that the “Additional Damage” (munzam zarar) institution regulated in Article 122 of the Turkish Code of Obligations allows the creditor to compensate for damages exceeding the default interest. The dissenting members asserted that the Court of Cassation provides facilities regarding the burden of proof for excess damage in its current precedents, and therefore, the existing legal regulation already contains an effective mechanism to protect the right to property.

Conclusion

The aforementioned annulment decision will enter into force nine months after the publication of the Decision in the Official Gazette (i.e., 1 September 2026), as the Constitutional Court deemed that the legal gap arising from the annulment would violate the public interest.

During this period, the legislative body is expected to enact a new legal regulation, particularly for compensation receivables arising from torts and administrative liability, that will prevent the erosion of receivables against inflation and ensure a fair balance between the public interest and the rights of individuals.