The 12th Civil Chamber of the Court of Cassation ruled with its decision numbered 2022/9954 (E. 2022/6460) and dated October 6, 2022 (the “Decision”) that the prohibition on determining a contract value in foreign currency or indexed to foreign currency which introduced by the Decree No. 32 on the Protection of the Value of Turkish Currency ("Decree No. 32") concerns public order and must be taken into account by the judge ex officio (automatically) even if it is not raised by the parties during the proceedings.
A) Evaluation of the Decision within the Scope of Turkish Legislation
Pursuant to the Decree No. 32, which was adopted for the purpose of protecting the value of the Turkish Lira, the contract value and other secondary payment obligations arising from the movable and immovable property sales and lease agreements (including vehicle and financial leasing), employment agreements, service and contractor agreements etc. which entered into force between Turkish residents, cannot be determined in foreign currency or indexed to foreign currency.
Article 63 of the Enforcement and Bankruptcy Law stipulates that the debtor who objects to a payment order, is not entitled to expand or change the grounds and objections raised against a debt before the enforcement office, during the proceedings. Furthermore, pursuant to Article 27/1 of the Turkish Code of Obligations, the contracts whose subject matter is against the mandatory provisions of the law, morality, public order, personal rights or whose subject matter is impossible, must be deemed invalid.
During the case subject to the Decision, the court ruled that the rental fee determined in foreign currency in violation of the Decree No. 32, concerns public order and although not objected by the debtor during the enforcement proceedings, must be taken into account by the judge ex officio during disputes. In summary, in case of a contract value determined in contrary to the Decree No. 32, the Article 63 of the Enforcement and Bankruptcy Law will not be applied, and the judge will ex officio consider such violation of the Decree No. 32, during its decision making process, for the purpose of preservation of the public order.
B) What Does the Decision Aim?
Considering the purpose of the Decree No. 32, it is observed that the public order introduced by the laws are reflected in legal practice through the Decision. Meaning that, it has been aimed to disseminate the economic public order which is to be protected by the Decree No. 32, in all areas of the law.
By Cerensu Cetin Yenigun, Senior Associate, and Selin Ivit, Associate, Moral, Kinikoglu, Pamukkale, Kokenek