Constitutionality Review

Contested Provision

The first paragraph of the contested provision provides that in cases where the payment of interest is required pursuant to Turkish Code of Obligations no. 6098 and Turkish Commercial Code no. 6102 and where no rate of interest has been determined by a contract, the interest shall be applied at an annual rate of twelve per cent, whereas the second paragraph stipulates that the President of the Republic is authorised to determine this rate on a monthly basis, to reduce it to a minimum of ten per cent, or to raise it up to double.    

Grounds for the Request for Annulment

It was maintained in brief that the contested provision infringes the right to property, and the principles of legal certainty and foreseeability, on the grounds that in periods of relatively high inflation, the gap between the interest rate and the inflation rate could be significant, that the interest rate specified in the contested provision is inadequate in an inflationary environment, that the provision provides no safeguard against the depreciation of money, and that the authority to increase the interest rate, granted to the President of the Republic, is also insufficient to prevent such depreciation. It was further argued that the contested provision is unconstitutional since the rates of deposit interest, loan and credit card interests, overdraft interest charged by banks, advance interest applied to commercial transactions, as well as the default interest and late payment surcharges applied to State’s receivables from citizens, are significantly higher than the rate of statutory interest, thereby giving rise to inequality. 

The Court’s Assessment

By virtue of its positive obligations, the State is required to take certain protective and corrective measures with regard to the right to property. Ensuring, where possible, the restoration of the adverse consequences arising from an interference with the right to property, or where this is not possible, the establishment of administrative or judicial mechanisms capable of redressing the loss or damage suffered by the owner constitutes a requirement of the State’s positive obligations in this regard.

In this context, the State must put in place mechanisms to compensate for the depreciation in value of a certain sum of money that, although due, could not be obtained. Mechanisms capable of compensating for such depreciation become particularly important in inflationary periods when the value of money persistently declines. That is because the purchasing power of a sum of money that could not be collected despite being due would have diminished corresponding to the inflation rate by the end of such periods.

In its various decisions, both in the context of individual applications and constitutionality review, the Court has noted that the receivables fall within the scope of the right to property, and that in case of delayed payment of receivables, paying interest below the inflation rates may interfere with individuals’ rights and affect public order (see the Court’s decisions no. E.1997/34, K.1998/79, 15 December 1998; no. E.2022/83, K.2023/69, 5 April 2023; and Mehmet Akdoğan and Others, no. 2013/87, 19 December 2013; Akel Gıda San. ve Tic. A.Ş., no. 2013/28, 25 February 2015; Abdulhalim Bozboğa, no. 2013/6880, 23 March 2016; and Ferda Yeşiltepe [Plenary], no. 2014/7621, 25 July 2017).

Therefore, in cases where it is intended to apply interest so as to compensate for the loss in value of the amount, which could not be collected despite being due, it is necessary to ensure that the interest rate applied, or the mechanisms established to determine this rate be capable of offsetting such depreciation. In this way, safeguards must be provided to ensure that the value of the monetary claim, diminished by inflation, is at least partially restored. That is because a delayed payment can only be considered appropriate and fair if the claim is restored without any loss in value.

In this regard, the first paragraph of the contested provision stipulates that in cases where statutory interest is payable, the interest shall be applied at an annual rate of twelve per cent on the principal amount. It is thus evident that the claimant may suffer an unreasonable economic loss due to inflation until the payment of a sum of money that is due but has not been received. Furthermore, although the second paragraph grants the President of the Republic the power to increase the statutory interest rate, this power is limited to an increase up to double the rate. It therefore follows that the rate of statutory interest prescribed by the contested provision may be increased by the President of the Republic to a maximum of twenty-four per cent per annum. 

In light of these considerations, the Court has observed that although the contested provision provides for the payment of a certain rate of interest in case of a delayed payment, it fails to offer any mechanism to ensure the payment of the sum due without a significant loss in value as a result of inflation, and that there is no effective legal remedy within the legal system capable of preventing the depreciation of receivables as a result of inflation. The Court has accordingly concluded that the contested provision is contrary to the right to an effective remedy enshrined in Article 40 of the Constitution, read in conjunction with the right to property safeguarded by Article 35 thereof.

Consequently, the contested provision has been found unconstitutional and therefore annulled in so far as it concerns “non-contractual liabilities”.