The Constitutional Court's Pilot Judgment On "Excess Damage" Rendered In The Individual Application With Application No. 2024/41763

What is Excess Damage?

"Excess damage" constitutes one of the special legal consequences of a debtor's default in monetary obligations. Conceptually,excess damage meaning "excess damage" refers to the portion of the creditor's loss arising from the debtor's default that cannot be compensated by default interest and exceeds the amount of such interest.

The provision governing additional (supplementary) damages under Turkish law is set forth in Article 122 of the Turkish Code of Obligations, which states: "If the creditor suffers damage exceeding the default interest, the debtor shall be obliged to compensate such damage unless the debtor proves that he is entirely without fault.
If the amount of the damage exceeding the default interest can be determined in the pending action, the court, upon the claimant's request, shall also rule on the amount of such damage when rendering its judgment on the merits."

As is understood from this provision, several elements must coexist in order to speak of excess damage. Indeed, these elements were clarified in the Court of Cassation 3rd Civil Chamber's decision dated 12 March 2024, which upheld the judgment of the 46th Civil Chamber of the Istanbul Regional Court of Appeal—the very decision that formed the basis of the Constitutional Court's individual application examined in this article. The required elements are as follows1:

1. The debtor must be in default arising from a monetary obligation. For a claim of excess damage to be admissible, the source of the debt is irrelevant; it is sufficient that there exists a monetary debt subject to default interest—whether arising from tort, contract, statute, or unjust enrichment. Moreover, the obligation to compensate this excess damage is entirely distinct from the principal debt and the obligation to pay default interest. It constitutes a new and independent liability that begins upon default and continues to accrue until the principal debt is performed.

2. The loss arising from the debtor's default must be a loss that cannot be compensated by default interest. Article 122 TCO applies not only to legal default interest but also to contractual default interest arrangements.

3. The debtor must be at fault in falling into default, because liability for excess damage unlike liability for default interest is based on fault. The requisite fault is the debtor's fault in entering into default. Where the other conditions are satisfied, it is presumed that the debtor is at fault in defaulting (presumption of fault). Consequently, the creditor does not need to prove the debtor's fault; rather, the debtor is liable for compensating the excess damage unless he proves that he was not at fault.

4. There must be an adequate causal link between the debtor's default and the creditor's excess damage. The creditor bears the burden of proving the adequate causal nexus between the debtor's default and the alleged excess damage.

Another point that warrants attention concerns the second element discussed above—namely, the requirement that the loss must be one not compensated by default interest. The question is whether, in order to prove such loss, the creditor must rely on specific facts and evidence (the concrete method), or whether it is also possible to assert a claim for excess damage without proving the concrete extent of the loss, relying solely on the general phenomenon of "the depreciation of money and economic fluctuations resulting from nationwide inflation" (the abstract method). Divergent views have emerged among the Chambers of the Court of Cassation on this issue. Some decisions2have held that it is not possible to speak of excess damage solely on the basis of inflation, adverse economic conditions, or the general depreciation of money. In contrast, other decisions3 have emphasized that placing the burden on the creditor to prove, through concrete factual evidence, the precise amount of the loss exceeding default interest would be unjust.

Given this state of affairs, when creditors bring actions for excess damage arising from the portion of their claims that remains unpaid due to the debtor's default and subsequently appeal the first instance judgments they may encounter divergent decisions based on differing judicial reasoning. This, in turn, creates a situation capable of undermining the principle of legal certainty and foreseeability, which must be safeguarded in a state governed by the rule of law. The Constitutional Court's pilot judgment that forms the subject of this article was rendered precisely for these reasons and on the grounds that will be discussed in detail below in order to highlight the need for a more effective and coherent statutory regulation concerning excess damage in Turkish law.

SUMMARY OF THE CONSTITUTIONAL COURT'S PILOT JUDGMENT
RENDERED IN THE INDIVIDUAL APPLICATION WITH APPLICATION NO. 2024/41763

Published in the Official Gazette dated 29 September 2025 and numbered 3302, the pilot judgment4 concerning the individual application specified above involved the applicant's allegation that the right to property and the right to an effective remedy had been violated.The applicant initiated enforcement proceedings on 9 November 2010 before the Şişli 3rd Enforcement Office (Enforcement Office) against T. Bankası A.Ş. (the Bank) for a principal claim of TRY 48,854 Upon the Bank's objection, the enforcement proceedings were stayed, and the applicant filed an action seeking annulment of the objection and the application of commercial interest to the principal claim. In this action, the applicant asserted that she had obtained a housing finance loan from the Bank to purchase a residence that B. Konut İnş. Taah. Tic. A.Ş. (the Company), a third party to the proceedings, had undertaken to construct. She claimed to have paid TRY 20,000 to the Company and TRY 28,854 to the Bank, but later learned that the residence would not be delivered. Accordingly, she argued that the Bank was jointly and severally liable with the Company for the entirety of the payments made. On 30 January 2020, the Istanbul 2nd Consumer Court (2nd Consumer Court) partially upheld the claim, ruling for the annulment of the Bank's objection and for the continuation of the enforcement proceedings for the principal amount of TRY 48,854 with annual default interest at the rate of 9%, to accrue from the date of the enforcement proceedings until full payment of the debt. In accordance with Article 67 of the Enforcement and Bankruptcy Law No. 2004, the court also awarded the applicant TRY 9,770.80 as bad faith indemnity, calculated at 20% of the principal debt, and rejected the remaining TRY 738 of the claim. This judgment was not appealed by either party and thus became final on 1 July 2020.

As is evident from the Constitutional Court's judgment, the fact that Turkish courts render divergent decisions in excess damage cases based on differing reasoning leads according to the ECtHR as well to violations of individuals' right to property and right to an effective remedy, both of which are protected under the ECHR. These violations stem from the State's failure, or insufficient fulfilment, of its positive obligations.

In its admissibility review in the individual application forming the basis of this article, the Constitutional Court held that the allegation concerning the violation of the right to an effective remedy in connection with the right to property was admissible, finding that it was not manifestly ill-founded and that no other ground existed requiring a decision of inadmissibility. On the merits, the Court stated the following: "If the interest for which debtors are held liable remains significantly below the rate of inflation, and if this loss cannot be compensated through any other legal mechanism, the likelihood of debts not being paid on time will increase. This situation will lead to a substantial rise in disputes and legal actions involving private legal persons. Debtors will effectively benefit from delaying payment, as they will pay interest below inflation and thus gain from not paying their debts on time (see, with some variations, CC, E.1997/34, K.1998/79, 15/12/1998). Articles 35 and 40 of the Constitution impose on the State the responsibility to establish legal mechanisms capable of remedying the significant loss of value that receivables suffer due to inflation. The State is obliged to take measures to ensure a fair balance between the interests of the parties involved in private-law disputes." "Failure to remedy the loss of value caused by inflation prevents the creditor from recovering the receivable at its real value; it results in the debtor paying an amount below the real value of the debt. Thus, the fair balance between the parties is disrupted to the detriment of the creditor, placing a disproportionate burden upon them. To restore the fair balance, the debtor must pay the debt at its real value, and it is clear that such an obligation would not impose an excessive burden on the debtor."

The Constitutional Court first examined whether an effective legal remedy existed that would allow the applicant to collect her finalized receivable considered her "property" without suffering a significant loss of value. It held: "It has been observed that an action for excess damage under Article 122 of the Code of Obligations No. 6098 does not guarantee compensation for the loss in value suffered by receivables due to inflation, and that the relevant case-law has not evolved in a manner indicating the existence of an effective legal remedy. Therefore, it has been assessed that actions for excess damage under former Code No. 818, Article 105, and current Code No. 6098, Article 122, do not have even a theoretical capacity to offer a reasonable prospect of success for compensating the loss in value caused by inflation. Consequently, it has been concluded that the legal system does not provide an effective remedy capable of ensuring compensation for the applicant's inflation-induced loss." Based on this reasoning, the Court found that the applicant's right to property under Article 35 of the Constitution, in conjunction with her right to an effective remedy under Article 40, had been violated. Having reached this conclusion, the Court emphasized the need for a new and effective regulatory framework in Turkish law to address such losses, and thus decided to apply the pilot judgment procedure. It stated:

Alongside its decision to apply the pilot judgment procedure, the Constitutional Court ruled that: The structural issue should be notified to the Grand National Assembly of Turkey to address the arbitrariness identified, examination of applications alleging violations of the right to property filed up to the date of the judgment, as well as any applications on the same matter recorded after that date, shall be deffered for a period of six months from the date of publication of the decision in the Official Gazette.

Following this judgment, the expected outcome is twofold: The notification of the identified arbitrariness to the Grand National Assembly of Turkey (TBMM), The deferral, for a period of six months from 29 September 2025 the date of publication in the Official Gazette of all other applications concerning excess damage, aside from the individual application examined in our article. This process is aimed at enabling the creation of a statutory framework in Turkish law through which creditors can seek compensation for excess damage in a manner that respects their property rights within the principles of legal certainty and predictability, while allowing them to exercise their right to an effective remedy.

BIBLIOGRAPHY :

1- Doç. Dr. Mehmet AKÇAAL – Güncel İçtihatlar Işığında Munzam Zarar / Dergipark

2- Pilot Judgement On "EXCESS DAMAGE" Rendered By The Constitutional Court Following The Individual Application With Application No. 2024/41763

3- Court of Cassation 3th Civil Chamber Case Number 2023/1897, Decision Number 2024/1099 Court of Cassation 10th Civil Chamber Case Number 2023/13690, Decision Number 2024/11814 Court of Cassation 5th Civil Chamber Case Number 2024/13282, Decision Number 2025/11207 Court of Cassation 7th Civil Chamber 2009/8308, Decision Number 2010/1227 Court of Cassation 6th Civil Chamber 2023/1766, Decision Number 2024/4097

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.