Unconstitutionality of the Statutory Interest Rate for Non-Contractual Debts – Decision of the Turkish Constitutional Court
With its decision dated 22 July 2025 and numbered E.2024/24, K.2025/164, the Constitutional Court ruled that Article 1 of the Law No. 3095 on Legal Interest and Default Interest dated 4 December 1984 is unconstitutional in respect of debt relationships not arising from a contract and annulled the provision.
- Content of the Regulation
Article 1 of the Law No. 3095 on Legal Interest and Default Interest, amended by Law No. 5335, stipulates that in cases where interest must be paid pursuant to the Turkish Code of Obligations and the Turkish Commercial Code, and where the parties have not agreed on a different rate, a statutory interest rate of 12% per annum shall apply. The same article grants the President the authority to set the statutory interest rate on a monthly basis, to reduce it down to 10%, or to increase it up to twice the base rate (maximum 24% annually).
- Grounds for the Objection
In the referral decision, the unconstitutionality of the provision was argued on the following grounds:
- That the statutory interest rate of 12% does not adequately compensate for the loss in value of the receivable during periods of high inflation,
- That no guarantee or compensation mechanism exists to preserve the purchasing power of monetary receivables,
- That the President’s authority to increase the rate is limited and that even the highest permissible rate remains insufficient against inflation,
- That the discrepancies between the statutory interest rate and the interest rates applied in banking transactions and public receivables lead to inequality,
- And that, for these reasons, the provision is incompatible with the right to property as well as the principles of legal certainty and foreseeability,
were asserted.
- Assessment of the Constitutional Court
The Court conducted its examination within the framework of the State’s positive obligations concerning the right to property and made the following determinations:
- a) Monetary receivables fall within the scope of the right to property.
The decision states that receivable rights constitute property protected by Article 35 of the Constitution, with references to previous case law (E.1997/34; E.2022/83; Mehmet Akdoğan; Akel Gıda; Bozboğa; Ferda Yeşiltepe).
- b) Mechanisms to prevent loss of value are mandatory.
It was noted that the State has an obligation to establish effective mechanisms to prevent excessive loss of value due to inflation when a monetary receivable is paid late.
- c) The statutory interest rate of 12% is insufficient in current economic conditions.
The Court found that, under current economic circumstances, the statutory interest rate:
- fails to preserve the purchasing power of the receivable,
- causes the right holder to suffer an unreasonable economic loss,
- creates an unjust advantage in favor of the debtor,
and recorded these findings accordingly.
- d) The President’s authority to increase the interest rate is limited.
The Court assessed that increasing the interest rate to a maximum of 24% is insufficient to protect receivables, especially during periods of high inflation.
- e) There is no other effective means to compensate for loss of value.
Since the legal system contains no separate mechanism to protect receivables against inflation, statutory interest becomes the only effective protection tool; however, it is incompatible with current economic conditions.
In light of these considerations, the Court concluded that the provision violates the right to property under Article 35 of the Constitution, in connection with the right to an effective remedy under Article 40.
- Conclusion
The Constitutional Court ruled that Article 1 of Law No. 3095 is unconstitutional in respect of “debt relationships not arising from a contract” and annulled the provision.
- Entry into Force
To prevent a possible legal vacuum, the date on which the annulment becomes effective was set as nine months after the publication of the decision in the Official Gazette. The decision was published in the Official Gazette No. 33094 dated 1 December 2025.
- Dissenting Opinion
Judges İrfan Fidan, Kenan Yaşar, Muhterem İnce, Yılmaz Akçil, Ömer Çınar, and Metin Kıratlı dissented.
In their dissenting opinion, it was stated that the determination of interest rates is an economic policy choice within the discretion of the legislative body. It was emphasized that statutory interest is not an instrument intended to compensate for inflation, but rather one that regulates the consequences of late performance of a debt; therefore, the fact that the interest rate remains below inflation does not, by itself, constitute unconstitutionality. It was further underlined that the President’s authority to increase the interest rate provides sufficient flexibility to adjust to economic conditions and that other mechanisms exist within the legal system to protect receivables.
You can access the full decision here.
