Inflation and the Right to Property:The Constitutional Court’s Decision on Statutory Interest
Introduction
Interest constitutes the consideration granted to a monetary creditor for the period during which they are deprived of the use of their funds within a debtor–creditor relationship.[1] In this sense, interest serves as a legal mechanism of compensation aimed at preserving the value of the creditor’s assets. Particularly in periods of high inflation, where the legislator has prescribed fixed interest rates, such rates may prove insufficient to protect the real value of certain receivables.
In its decision dated 22 July 2025, numbered E.2024/24, K.2025/164, published in the Official Gazette dated 1 December 2025 and numbered 33094 (the “Decision”), the Constitutional Court annulled Article 1 of Law No. 3095 on Statutory Interest and Default Interest (“Law No. 3095”) on the grounds that it is unconstitutional insofar as it applies to obligations not arising from a contract. The Decision will enter into force nine months following its publication in the Official Gazette. It places particular emphasis on whether the interest rates applicable to compensation payable to individuals who have suffered damage—especially in situations where the administration’s liability is engaged, such as natural disasters—are sufficient to ensure the protection of the right to property.
This article examines the background and reasoning of the Decision, the arguments put forward in the dissenting opinions, and the legal consequences arising therefrom.
The Provision Subject to Annulment
Under the contested regulation, where interest becomes payable—whether in commercial or non-commercial transactions—and the applicable interest rate has not been contractually agreed, the statutory interest and default interest rates prescribed under Law No. 3095 apply to both principal and default interest claims. The statutory interest rate is regulated under Article 1 of Law No. 3095 as follows:
“Where interest is required to be paid pursuant to the Code of Obligations or the Turkish Commercial Code, and the rate has not been determined by contract, such payment shall be made at an annual rate of twelve per cent.
The President is authorized to determine this rate monthly, to reduce it by up to ten per cent, or to increase it by up to one hundred per cent.”
Pursuant to the second paragraph of the relevant provision, the statutory interest rate was set at 24% per annum by Presidential Decree No. 8485 dated 20 May 2024.
In the case pending before the Kahramanmaraş 3rd Administrative Court, the claimants sought compensation for the damages they suffered because of the destruction of their immovable property due to the earthquake. Regarding the applicable interest rate, it was argued that the statutory interest rate provided under Article 1 of Law No. 3095 was inadequate to preserve the real value of the receivable, particularly under conditions of high inflation. On this basis, an application was made for constitutional review, alleging that the provision violated Articles 2, 5, 10, 13, 35, 36, 125, and 138 of the Constitution.
The Constitutional Court’s Assessment
The Constitutional Court assessed the contested provision, insofar as it applies to obligations not arising from a contract, within the scope of Article 35 of the Constitution, which safeguards the right to property. According to the Court, interest is a tool designed to compensate for the loss in value of a monetary claim that, although due, could not be obtained in a timely manner. During the period in which the creditor is deprived of the receivable, inflation erodes the value of money, resulting in a reduction in the real value of the property, while simultaneously eliminating the opportunity to benefit from that amount as a savings or investment instrument. For this reason, the state is required to develop mechanisms capable of compensating for the depreciation in value of sums that are due but cannot be collected on time.
The Court emphasized that fixed and low interest rates during periods of high inflation fail to prevent the depreciation of the creditor’s funds and impose an excessive and disproportionate burden on the creditor. It further noted that the President’s authority to determine the interest rate is limited under the second paragraph of the provision, as the rate may be increased by no more than one hundred percent. Accordingly, the statutory interest rate stipulated under the rule may only be increased to a maximum of 24% by the President.
Within this framework, the Constitutional Court held that the failure of the statutory interest rate to protect the value of receivables against inflation in obligations not arising from a contract constitutes a violation of the right to property guaranteed under Article 35 of the Constitution, as well as the right to an effective remedy under Article 40. Consequently, the Court ruled for the annulment of Article 1 of Law No. 3095 insofar as it applies to obligations not arising from a contract.
Dissenting Opinion
The members who dissented from the Decision did not concur with the majority’s approach and argued that the contested provision was not unconstitutional. In the dissenting opinions, reference was made to the default provisions of the Turkish Code of Obligations, noting that where statutory default interest remains below inflation during periods of high inflation, the creditor may claim the difference between the interest and inflation as additional damages pursuant to Article 122 of the Turkish Code of Obligations. On this basis, it was argued that the statutory interest rate alone is not sufficient to conclude that the right to property has been violated.
The dissent further stated that Article 122 of the Turkish Code of Obligations provides a mechanism enabling creditors to recover losses exceeding the amount covered by default interest. Accordingly, within the scope of the state’s positive obligations under Article 5 of the Constitution, it should be accepted that an effective mechanism exists to prevent the depreciation of money due to inflation. For this reason, the dissenting members considered it untenable to agree with the view that Article 1 of Law No. 3095 fails to compensate for the loss in value of receivables caused by inflation.
Conclusion
The Constitutional Court’s Decision demonstrates that statutory interest regulations must be assessed not only within the technical framework of the law of obligations but also in light of fundamental rights and freedoms.
One notable aspect of the Decision is that the Constitutional Court does not confine the right to property solely to direct interferences with existing assets but also considers the failure to collect a receivable in a timely manner and at its real value as falling within the scope of a violation of this right. Moreover, the distinction drawn by the Court between contractual obligations and obligations not arising from a contract is of particular significance.
While the prospective entry into force of the annulment decision affords the legislator an opportunity to enact new regulations, it simultaneously prevents the emergence of a legal vacuum that could undermine the public interest.
Ultimately, this Decision of the Constitutional Court transcends the classical understanding of statutory interest and offers an example of constitutional interpretation aligned with economic realities. The Decision can be regarded not merely as an annulment with retroactive implications, but as a guiding precedent for future legislative action and judicial practice.
- Oğuzman, M. Kemal, Öz, M. Turgut: Borçlar Hukuku Genel Hükümler Cilt 1, Vedat Kitapçılık, 2013, s.312.
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