Recent Developments
With its decision dated 22 July 2025, numbered 2024/24 E. and 2025/164 K. (“Decision”), the Constitutional Court ruled to annul Article 1 of Law No. 3095 on Statutory Interest and Default Interest (“Law No. 3095”) with respect to obligations not arising from a contract. The Decision was published in the Official Gazette on 1 December 2025 and will enter into force nine months after its publication, i.e., on 1 September 2026.
Provision Subject to Annulment and Background
Article 1 of Law No. 3095, which is subject to annulment, stipulates that in cases where interest is payable under the Law of Obligations and the Turkish Commercial Code, if the amount is not determined by contract, statutory interest shall be applied at an annual rate of 12%. The President is authorized to set this rate on a monthly basis, reduce it by up to ten percent and increase it up to twice the amount.
By Presidential Decree No. 8485 dated 20 May 2024, the President exercised the authority to increase the statutory interest rate up to twice the amount and decided that, as of 1 June 2024, statutory interest would apply at an annual rate of 24%.
The Kahramanmaraş 3rd Administrative Court, in a case seeking compensation for damages resulting from the destruction of immovable property due to the earthquake, applied to the Constitutional Court on the grounds that Article 1 of Law No. 3095 was unconstitutional. The court argued that the statutory interest rate set by the provision was significantly low compared to inflation, offered no safeguard was provided to ensure the preservation of the value of money, and thereby violated the right to property, requesting its annulment.
What Does the Decision Say?
In its Decision, the Constitutional Court held that both the claim for interest and the principal claim fall within the scope of the right to property and conducted its review within this framework.
The Court concluded that the current interest rate is inadequate against inflation and that the statutory regulation fails to provide an effective compensation mechanism. Accordingly, it ruled that the statutory interest rate applicable to obligations not arising from a contract violates Articles 35 and 40 of the Constitution and annulled the provision. Furthermore, considering that immediate enforcement of the annulment would create a legal vacuum posing a risk to public interest, the Court decided that the Decision shall enter into force nine months after its publication in the Official Gazette.
Before the Decision enters into force, it is likely that the Grand National Assembly of Türkiye will enact new legislation. The potential impact of this Decision and any new legislative arrangement on existing disputes will also need to be carefully assessed.
