Turkey’s Top Court: Inflation is Stealing Your Money

The Turkish Constitutional Court has issued a landmark pilot ruling on the impact of inflation on debt claims, declaring that the failure to compensate creditors for value loss caused by inflation amounts to a violation of property rights and the right to effective remedy.

The ruling came in response to the individual application of Caner Şafak, who argued that the statutory interest rates applied in his case did not safeguard the real value of his receivable, leaving him financially disadvantaged.

A Decade-Long Legal Struggle

The applicant’s story illustrates the deep flaw in the current system. In 2010, Şafak initiated enforcement proceedings against a private bank, with his principal claim recognized at 48,854 TL. After a lengthy cycle of objections, appeals, and court procedures, the payment was finally made in 2020—but by then, the amount had risen only to 119,114 TL.

While the nominal figure had increased due to statutory interest, Şafak argued that this ten-year wait eroded the real purchasing power of his money. By the time he received the payment, inflation had far outpaced the applied interest rate, resulting in a substantial financial loss.

Seeking redress, Şafak filed a “munzam zarar” (additional damages) lawsuit for 100,000 TL. However, his claim was dismissed at every judicial level, including consumer courts, appellate courts, and the Court of Cassation.

Constitutional Court: Rights Were Violated

In its ruling, the Constitutional Court held that both the right to property and the right to an effective remedy under Article 40 of the Constitution were breached.

The judges emphasized that the state has a responsibility to maintain a fair balance between creditors and debtors, not only in cases involving public debt but also in private-law disputes.

The decision specifically criticized the Law No. 3095 on Legal Interest and Default Interest, finding that statutory interest rates set under this law are inadequate in protecting claims against inflation. The Court stated:

“The statutory interest rates fall short of annual inflation, rendering them incapable of compensating creditors for the real value loss of their receivables.”

Munzam Zarar Lawsuits Fail to Protect

The Court also addressed the inefficacy of munzam zarar lawsuits brought under Article 122 of the Turkish Code of Obligations.

According to the ruling, these lawsuits often fail to provide meaningful protection due to inconsistent precedents and uncertain standards of proof. In many cases, courts did not accept inflation alone as sufficient proof of damage, leaving creditors exposed and without remedy.

“The case law developed by higher courts is unstable and unpredictable. Where inflation is not considered adequate to prove damage, creditors are left defenseless,” the Court noted.

Pilot Decision: A Call for Systemic Reform

What makes this ruling especially significant is the Court’s decision to apply the “pilot judgment” procedure. This means that the ruling goes beyond the individual case and acknowledges a structural deficiency in Turkey’s legal system.

By invoking the pilot judgment method, the Constitutional Court effectively called on parliament and judicial authorities to establish a clear and effective legal mechanism to compensate creditors for inflationary losses in receivable disputes.

The Court warned that unless comprehensive reforms are enacted, similar violations will continue to occur, leading to further rights infringements.

Broader Implications for the Economy

This decision has the potential to reshape debt and enforcement practices in Turkey. If legislative or judicial reforms follow, creditors may soon be entitled to more robust compensation mechanisms that align receivables with inflation-adjusted values.

Such reforms could impact:

• Banks and financial institutions, which would face higher compensation liabilities.

• Businesses engaged in long-term contractual debts, who might see their financial obligations recalibrated.

• Ordinary citizens and consumers, who may gain stronger protection against value loss in lengthy legal battles.

Economists suggest that this ruling could also strengthen trust in the legal system, making long-term contracts and debt enforcement more predictable and fair in an environment where inflation remains a persistent challenge.

Conclusion

The Constitutional Court’s decision in the Caner Şafak case is more than a victory for one individual—it is a systemic wake-up call. By recognizing that statutory interest rates and munzam zarar lawsuits fail to shield creditors from inflation, the Court has set the stage for structural legal reform in Turkey.

As a pilot judgment, it now places the responsibility squarely on the shoulders of lawmakers and judges to create a clear, effective, and inflation-proof system of compensation. Until then, the gap between nominal justice and real economic fairness will remain unresolved.