The Constitutional Court Annuls Statutory Interest Provision Under Law No. 3095 for Non-Contractual Obligations
Introduction
The Constitutional Court, in its decision dated 22 July 2025 and numbered 2024/24 E., 2025/164 K., published in the Official Gazette on 1 December 2025, annulled Article 1 of the Law No. 3095 on Statutory Interest and Default Interest (“Law No. 3095”) with respect to non-contractual obligations (the “Decision”).
Background
- Pursuant to Article 1 of Law No. 3095, stipulates that in cases where interest is payable under the Turkish Code of Obligations or the Turkish Commercial Code and the rate of interest has not been contractually determined, statutory interest shall be applied at an annual rate of 12%. The President is authorised to decrease this rate by up to ten percent or increase it up to twice the amount.
- 12% rate was increased to 24% per annum by Presidential Decree No. 8485 dated 20 May 2025, with effect from 1 June 2024.
- This statutory rate applies not only to contractual claims but also to claims arising from tort, unjust enrichment, functioning as a general and common rule.
- In the case giving rise to the Decision, a citizen whose property was destroyed during the earthquake, filed a compensation claim before the Kahramanmaraş 3rd Administrative Court, seeking damages. The Administrative Court argued that the statutory interest rate determined under Article 1 of Law No. 3095, as well as the President’s authority to increase this rate, were insufficient in the face of the prevailing inflation and did not provide a safeguard capable of preserving the value of money. The Administrative Court therefore referred the matter to the Constitutional Court, requesting the annulment of the provision on the grounds that it violated the constitutional right to property.
The TCC Concludes That the Statutory Interest Rate Under Article 1 of Law No. 3095 Does Not Provide an Effective Compensatory Mechanism Against Inflation
In its assessment, the Constitutional Court held the following:
- The Court first emphasised that claims for interest and principal fall within the scope of the right to property, and thus examined the matter through the lens of property rights.
- The Court found that the existing statutory interest rate fails to compensate for the loss of value caused by inflation and therefore does not provide an effective remedy. Accordingly, it concluded that the statutory interest rate applicable to non-contractual obligations violates Article 35 of the Constitution (right to property) and Article 40 (right to an effective remedy), and decided to annul the relevant provision.
- The Court further ruled that the annulment shall take effect nine months after its publication in the Official Gazette, noting that an immediate annulment would create a legal vacuum that could adversely affect the public interest. It is expected that the Turkish Grand National Assembly will enact a new legislative arrangement before the Decision enters into force.
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