Protecting Monetary Claims In An Inflationary Economy: The Evolving Jurisprudence On Additional Damages (Munzam Zarar) In Türkiye

1. Summary and Introduction

The ongoing high inflation in Türkiye has made the protection of the real value of monetary claims more crucial than ever. Lengthy judicial proceedings and delayed payments have revived the question of how to compensate the creditor's loss in value.

In Turkish law, this loss is termed "munzam zarar" (additional damages or excess loss) and is regulated under Article 122 of the Turkish Code of Obligations (TBK 122). However, the chambers of the Court of Cassation and its General Assembly on Civil Chambers ("HGK" or "the Assembly") have long interpreted this issue differently. One view maintains that the loss must be proven with concrete evidence; another adopts a more flexible approach that takes into account economic realities, inflation rates, and principles of equity. This jurisprudential divergence gained a new dimension with the pilot judgment of the Constitutional Court ("AYM") dated 8 July 2025.

The Court found that the existing system fails to compensate the creditor's real loss, identifying the problem as a structural deficiency. It emphasized that the solution can no longer be achieved merely through judicial interpretation but requires intervention by the Grand National Assembly of Türkiye (TBMM).

This judgment ushered a new era in the debate on how monetary debts should be protected against inflation, affecting both creditors and debtors. The present article systematically examines the current state of the law of obligations concerning compensation for additional damages in light of the decisions of the chambers of the Court of Cassation, the General Assembly, and the Constitutional Court's pilot judgment.

2. What Is Additional (Excessive) Damage and How Is It Proven?

Pursuant to Article 122 of the Turkish Code of Obligations, additional damage refers to the loss suffered by the creditor due to late payment of a monetary debt, to the extent that such loss is not covered by statutory default interest. The provision rests on the principle of corrective justice and aims to restore the real decrease in the creditor's assets caused by the delayed payment of the debt.

Four cumulative conditions must be met for a claim for compensation of additional (excessive) damages to be granted:

1. The debtor must be in default,
2. There must be a loss exceeding the interest,
3. There must be a causal link between the loss and the default, and
4. The debtor must be at fault.

The main controversy in practice concerns how this loss should be proven. Can general economic facts such as high inflation or rapid currency depreciation be regarded as sufficient presumptions of loss, or must the creditor in every case present concrete evidence?

This question forms the basis of the long-standing divergence in the case-law of the Court of Cassation. On one side stands the strict interpretive approach requiring the loss to be proven concretely; on the other, the view that adopts a more flexible understanding of proof considering prevailing economic conditions. Consequently, actions for additional damages remain among the most contentious issues in the practice of the law of obligations.

3. The Dominant Doctrine in the Court of Cassation: "Concrete Proof"

For many years, certain chambers of the Court of Cassation have maintained that the creditor must prove, with concrete evidence, the loss exceeding statutory interest in order to obtain compensation for additional (excessive) damage.

The foundation of this doctrine is the view that general economic phenomena such as inflation have already been taken into account by the legislature when determining statutory interest rates. Accordingly, awarding further compensation on the basis of the same facts would amount to an assessment beyond the competence of the judiciary.

One of the clearest foundations of this approach is the decision of the General Assembly on Civil Chambers dated 19 June 1996 (E. 1996/144, K. 1996/503). The Assembly characterised awarding compensation exceeding statutory interest as an "excess of authority": "While the legislature has evaluated all these economic adversities and, on the basis of its constitutional power to legislate, determined the rate of compensation for the loss they cause, it is not acceptable to imply that such legislative discretion is inappropriate and to hold, on the same economic indicators, that the loss to be compensated is not 30 percent but 60 or 70 percent."

In the same decision, the Assembly emphasized that the additional (excessive) damage to be proven is not the "possible profit or presumed income" missed due to late payment but rather the actual loss suffered by the claimant arising from "concrete circumstances stemming from the claimant's own assets or economic and social activities."

This strict approach was reaffirmed many times over the years by the General Assembly. For instance, in its decision of 29 March 2022 (E. 2021/938, K. 2022/401), the Assembly restated the principle in modern terms:

"Therefore, the excessive loss exceeding interest, envisaged to be compensated under Article 122 of the TCO, must be proven by concrete facts specific to the claimant's circumstances, beyond general economic adversities (current inflation rate, high and fluctuating exchange rates, deposit interest rates, decrease in purchasing power of money). In other words, high inflation, increase in the dollar exchange rate, high market interest rates, or the decrease in purchasing power do not release the claimant from the burden of proof, nor do they provide any ease of proof."

Similarly, the 3rd Civil Chamber of the Court of Cassation has consistently followed this line. In its judgment dated 10 March 2022 (E. 2022/691, K. 2022/2136), the chamber stated:

"The mere fact that inflation or bank deposit interest exceeds the default interest rate does not mean that additional loss has occurred and been proven. What must be proven by the claimant is not such general phenomena as inflation or high deposit rates but the fact that he personally and concretely suffered loss due to the delay in payment."

4. Cracks in the Dominant View: Judgments Adopting a Flexible Approach

Although the "concrete proof" approach has long prevailed in the Court of Cassation, the line of case-law has never been entirely uniform. From time to time, judgments have adopted a more flexible interpretation mindful of economic realities and equity.

One such example is the General Assembly's decision dated 7 February 2007 (E. 2007/55, K. 2007/53). In this case, the Assembly ruled that the local court should comply with the chamber's reversal of its dismissal based on "lack of concrete proof." The reversing chamber held that the following elements should be investigated for assessing the loss: "...the annual inflation rate realized for each year, its reflection on commodity prices, the interest rates paid on deposits and government bonds, and the tables showing changes in foreign exchange rates against the Turkish lira..."

This judgment is significant in that it accepted general economic indicators as possible criteria for calculating the loss, contrary to the strict doctrine that excluded such indicators.

A similar flexible interpretation was carried further in the decision of 13 June 2012 (E.2011/730, K. 2012/373). In a case concerning the non-payment of expropriation compensation over an excessively long period, during which the purchasing power of the money had evidently eroded, the Assembly held that the existence of the creditor's loss need not be separately proven and should be presumed: "Given that the plaintiffs have not yet collected the compensation for their expropriated property despite the lapse of a long time, it must be accepted—considering the purchasing power of this amount on the date of the lawsuit—that they have proven their loss."

However, the dissenting opinion in the same case defended the classical view that "high inflation or exchange-rate increases do not release the creditor from the burden of proof." This clearly illustrates the deep divide within the Court of Cassation and why the issue has remained unresolved over the years.

5. How Did the 2017 Constitutional Court Decision Affect Claims for Additional Damages?

The Court of Cassation's long-standing strict evidentiary approach in additional-damage claims came before the Constitutional Court in 2017. In its judgment dated 21 December 2017 (Application No. 2014/2267), the Court held that imposing an excessive burden of proof on claimants was incompatible with the right to property under Article 35 of the Constitution.

The AYM considered that insisting on concrete proof despite the obvious depreciation of the claimant's monetary receivable due to inflation upset the fair balance to the creditor's detriment: "Since it has been established that the applicant's receivable, protected under the right to property, was paid after losing significant value against inflation, it has been concluded that an excessive and extraordinary burden was imposed on the applicant, and that, notwithstanding this finding, the lower courts' insistence on requiring additional proof of loss disturbed the fair balance against the applicant."

This decision had a notable impact on the Court of Cassation, prompting some chambers to reconsider their established approach. One example is the decision of the 15th Civil Chamber dated 25 April 2018 (E. 2017/2736, K. 2018/1742), where the chamber explicitly shifted direction, holding that, under continuing economic conditions, inflation should be regarded as a "notorious and well-known fact":

"Although our chamber has long required concrete proof of additional loss, considering the evolving economic conditions, the protection of the right to property, and the binding nature of the Constitutional Court's decisions, it has become necessary to depart from the general rule of proof and to accept inflationary pressure, so long as it persists, as a notorious fact, thereby dispensing the creditor from the obligation to prove the existence of additional damage."

Nevertheless, this approach did not evolve into uniform case-law across the Court of Cassation. In its judgment of 9 December 2021 (E. 2017/2800, K. 2021/1629), the General Assembly still upheld the "concrete proof" rule; however, dissenting opinions referred to the AYM decision and argued that the strict application should be reconsidered:

"With this decision of the Constitutional Court, the prevailing practice requiring the existence and proof of concrete loss must be re-examined... While recognizing the existence of concrete loss in cases where the creditor had to borrow money due to the delay, one cannot claim that a person who, in an inflationary environment, had to use their own resources—subject to the right to property—suffered no loss."

The AYM's decision thus rendered the divisions within the Court of Cassation more visible. Some members adopted the emphasis on the right to property, while others adhered to the traditional line of obligations law. Hence, the 2017 judgment remained a constitutional warning paving the way for the pilot decision of 2025.

6. A Search for a Way Out: The Innovative "Economic Basket" Formula of the 6th CivilChamber

During this period, the 6th Civil Chamber of the Court of Cassation took one of the most remarkable steps regarding additional (excessive) damage with its decision dated 13 January 2025 (E. 2024/3534, K. 2025/15).

The chamber ruled that in times of high inflation, there is no need for separate proof of loss, describing such situations as "facts known to everyone in the ordinary course of life" and treating the existence of loss as a factual presumption. What makes the 6th Chamber's approach innovative is the concrete method it proposed for calculating the loss. In the model called the "economic basket method," the chamber suggested that the loss should be determined by taking the average of several economic indicators:

• Annual inflation rates (WPI–CPI)
• Three-month average time-deposit interest rates
• Government bond interest rates
• Changes in exchange rates (USD and EUR)
• Increase in the minimum wage
• Rise in gold prices

This method, unlike previous case-law, introduced an objective calculation model directly considering economic realities. Thus, it proposed a systematic formula for determining compensation for additional damages under Article 122 of the TCO. The 6th Chamber's decision is regarded as a significant turning point among Court of Cassation judgments, both for challenging the doctrine of concrete proof and for providing a methodological framework for quantifying loss.

7. Judicial Deadlock and Constitutional Intervention: Analysis of the 2025 Pilot Judgment of the Constitutional Court

The deep divergence between the chambers and the General Assembly has transformed the additional-damage debate from a mere interpretative inconsistency into a fundamental-rights issue. This judicial deadlock eventually reached the Constitutional Court, resulting in the pilot judgment of 8 July 2025 (Application No. 2024/41763).

In the concrete case, the applicant had recovered a receivable arising from a bank loan, together with statutory interest, after ten years of litigation, but claimed that the real value of the receivable had largely eroded due to high inflation and therefore sought additional damages. The 3rd Civil Chamber of the Court of Cassation, adhering to its established strict precedent, dismissed the claim on the ground that no concrete proof beyond general economic phenomena had been presented.

The AYM treated the issue not as an individual violation but as a structural problem affecting the entire legal system. According to the Court, the current legal framework does not provide an effective remedy to compensate the creditor's real loss caused by inflation.

The AYM's finding rested on two main grounds:

First, it held that the statutory interest rates set by Law No. 3095 are far from compensating real losses during periods of high inflation. By comparing interest rates with CPI data, the Court found that statutory interest lagged significantly behind inflation.

Second, it noted that Article 122 of the TCO—which should serve to fill the gap left by inadequate statutory interest—had become ineffective due to the Court of Cassation's strict "concrete proof" approach. By disregarding nationwide economic data such as inflation, the judiciary had rendered this remedy practically inoperative.

Finding both mechanisms insufficient, the AYM addressed the issue at a systemic level. It characterized the violation not merely as individual but as structural, and therefore applied the pilot-judgment procedure.

Within this framework, the Court found violations of two constitutional rights:

• The Right to Property (Article 35 of the Constitution): Failure to preserve the real value of a receivable constitutes interference with the essence of this right.
• The Right to an Effective Remedy (Article 40): Existing legal avenues do not, in practice, provide an effective solution to remedy the loss.

The Court concluded that the issue cannot be resolved merely through judicial interpretation and decided to notify the legislative branch. It also suspended adjudication of similar individual applications for six months, calling upon the legislature to establish an effective compensation mechanism within that period.

The dissenting opinion argued that the problem was interpretative, not legislative, and that it could be resolved through reconsideration of the Court of Cassation's jurisprudence. Nevertheless, the majority's reasoning transformed the debate on additional (excessive) damage in Türkiye from the level of individual cases into one of systemic legal reform.

8. Conclusion and Evaluation: Analysis of the Legal Landscape Amid Uncertainty

The evolution of case-law on compensation for additional (excessive) damage clearly demonstrates how complex the trajectory of a legal rule can become over time. The core problem lies in the inconsistency of the General Assembly's decisions across different periods and the deepening divergence among the chambers.

On one side stands the strict line exemplified by the decisions of 1996, 2021, and 2022, insisting on concrete proof; on the other, the flexible approach reflected in the 2007 and 2012 decisions, which take economic indicators into account. This fragmented picture means that identical cases may yield entirely different results depending on the chamber hearing the case or the period in which it is filed.

The Constitutional Court's 2025 pilot judgment characterized this disarray not as an individual rights violation but as a structural deficiency in the system. The Court explicitly stated that the issue cannot be solved solely through judicial precedent and that a legislative amendment is required to establish an effective compensation mechanism.

At this stage, two possibilities come to the forefront:
Whether the Grand National Assembly of Türkiye will respond to the AYM's call by enacting new legislation, and whether the Court of Cassation will eliminate the jurisprudential inconsistency through a unification of judgments.

Until either of these mechanisms is activated, actions until either of these mechanisms is activated, claims for additional (excessive) damages will continue to remain uncertain in practice. In this process, the most rational approach for practitioners will be to shape litigation strategies based both on the existing lines of case-law and on the Constitutional Court's evaluations concerning the rights to property and to an effective remedy.

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