I. Introduction
Foreign-currency claims are an indispensable element of modern commercial life in Türkiye, particularly given the country’s integration into global trade and finance. However, when such receivables reach the collection stage, creditors often face an invisible yet decisive obstacle: exchange rate risk. The volatility of the Turkish lira and the complex interaction between contractual provisions, statutory rules, and judicial interpretation make the enforcement of foreign-currency debts a sophisticated legal and economic challenge.
The risk emerges when a debt denominated in a foreign currency must be collected through Turkish courts or execution offices. Between the date when the debt becomes due and the date of actual payment, significant fluctuations in exchange rates may occur. If not properly managed, these fluctuations can substantially reduce the real value of the receivable. This article examines how Turkish law allocates, regulates, and mitigates that risk, focusing particularly on the collection phase — when a judgment or enforcement action transforms a contractual right into an actual monetary recovery.
II. Conceptual Framework: Nature of Foreign-Currency Obligations
1. Currency of Account and Currency of Payment
A foreign-currency obligation typically involves two dimensions:
- the currency of account, in which the debt is denominated; and
- the currency of payment, in which the obligation must be discharged.
While the parties may freely select a foreign currency as the measure of value, the default rule under Turkish law still allows the debtor to pay in Turkish lira, unless the contract explicitly requires effective payment in the foreign currency itself. This fundamental rule — enshrined in Article 99 of the Turkish Code of Obligations (TBK) — forms the cornerstone of the exchange-rate debate.
2. The Economic Logic of Exchange-Rate Exposure
From a financial perspective, exchange-rate risk arises when the performance of an obligation in one currency must be converted into another at an uncertain future rate. The creditor’s exposure depends not only on the level of volatility but also on the legal timing of conversion. Under Turkish law, several potential conversion moments exist:
- the date of maturity (when payment was due),
- the date of judicial filing,
- the date of judgment,
- the date of enforcement filing, or
- the date of actual payment.
Selecting or failing to preserve the correct conversion date determines whether the creditor retains or loses the real economic value of the receivable.
III. Legal Basis: Exchange-Rate Mechanisms in Turkish Law
1. Article 99 of the Turkish Code of Obligations
Article 99 TBK governs money debts. It provides that payment must, in principle, be made in Turkish currency. However, where the debt is stipulated in a foreign currency, the debtor may pay either in that currency or in Turkish lira, calculated according to the exchange rate on the day of payment, unless the contract requires payment in the original currency “in kind” (“aynen ödeme”).
This rule serves two functions:
- It protects the debtor’s freedom to discharge in local currency;
- It allows the creditor to resist premature or disadvantageous conversion if the contract expressly demands effective payment in the foreign currency.
In practice, this means that creditors who want to avoid forced conversion into lira must explicitly stipulate that payment shall be made in the foreign currency itself, and that the debtor cannot validly discharge the obligation by tendering the lira equivalent.
2. Election Right of the Creditor
When a foreign-currency debt becomes due and remains unpaid, the creditor may elect either:
- to demand payment in the original foreign currency, or
- to demand its Turkish lira equivalent, based either on the exchange rate at the maturity date or the actual payment date.
This election mechanism is vital for minimizing exchange-rate loss. However, once the creditor makes an explicit election, it cannot usually be altered during litigation or enforcement. Therefore, strategic timing and careful drafting in the pleadings are essential.
3. Interaction with Execution and Bankruptcy Law
Even though the substantive debt may remain in foreign currency, the Turkish Execution and Bankruptcy Law (İcra ve İflas Kanunu – İİK) requires that claims be expressed in a manner suitable for the calculation of court and enforcement fees. Thus, in practical terms, the creditor must also indicate a Turkish lira equivalent and the date of the exchange rate used for that calculation.
This procedural requirement does not convert the substance of the claim into lira; it merely allows the administrative machinery of enforcement to function. However, careless drafting at this stage often leads to implied conversion, with irreversible financial consequences.
IV. Exchange-Rate Risk Across the Stages of Enforcement
1. Contract Formation
The foundation of risk management lies in contract drafting. Clauses such as “payment shall be made in USD without conversion into Turkish currency” or “payment obligation shall be discharged only upon transfer of the agreed foreign currency amount to the creditor’s bank account” are indispensable. Absent such wording, the debtor may lawfully tender payment in lira at the rate on the payment day, regardless of depreciation.
2. Default and Demand
Once default occurs, the creditor should send a notice of default (ihtar) that explicitly reiterates the claim in its foreign-currency denomination and reserves the right to demand payment in that currency. This notice also fixes the creditor’s subsequent election rights under TBK 99.
3. Judicial Proceedings
During litigation, the statement of claim must make the currency logic explicit. A creditor who claims a sum “equivalent to USD 100,000 in Turkish lira” may be treated as having accepted conversion, while a demand framed as “payment of USD 100,000, or alternatively its Turkish lira equivalent calculated at the exchange rate on the actual payment day” keeps the claim economically protected.
4. Judgment
Courts may render judgments either in the foreign currency itself or in Turkish lira equivalents. Modern jurisprudence increasingly accepts foreign-currency judgments where the obligation’s nature or the parties’ agreement requires it. The judgment must also specify the interest regime — whether interest accrues in the same currency or in lira — to avoid future enforcement ambiguities.
5. Enforcement and Collection
At the enforcement stage, the risk culminates. The follow-up request (takip talebi) must indicate both the foreign-currency principal and the Turkish-lira equivalent used for fee calculation. The exchange-rate date chosen for that equivalent can materially affect the creditor’s economic recovery.
If the creditor inadvertently bases the enforcement value on an outdated rate, the enforcement office will treat that figure as fixed, and later exchange-rate changes will not be reflected automatically. Therefore, the date of conversion must be selected deliberately and justified as consistent with the creditor’s earlier election under TBK 99.
V. The Role of Interest: Preserving Real Value Over Time
1. Statutory Framework
The law governing interest on foreign-currency debts is Article 4(a) of Law No. 3095 on Legal Interest and Default Interest. It provides that, where no contractual rate exists, default interest on foreign-currency debts accrues at the rate applied by Turkish state banks to one-year deposits in the relevant currency.
This provision ensures that a foreign-currency debt remains economically coherent: interest accrues in the same currency, reflecting international lending conditions, rather than in lira, which would distort value.
2. Judicial Consistency and Common Pitfalls
Courts generally uphold the logic that an FX principal should attract FX-denominated interest. However, inconsistencies appear when claims are ambiguously pleaded. If the creditor demands TRY interest on an FX principal, the enforcement office may interpret this as an election to convert. Likewise, demanding interest without specifying the currency often results in a default to TRY interest, thereby undermining value preservation.
3. Compound Risk: Exchange Rate + Interest Mismatch
If exchange-rate conversion and interest calculation diverge, the result can be economically irrational. For example, converting a USD debt into lira at a historical rate while applying TRY default interest produces a hybrid result that under-compensates the creditor compared to a true USD-based yield. Therefore, consistency across principal, interest, and conversion terms is indispensable.
VI. Exchange-Rate Date: Competing Reference Points
1. Maturity Date
Using the exchange rate on the maturity date freezes the debt’s value at the moment of default. This favors debtors when the local currency depreciates after default, since the converted amount does not rise with inflation or devaluation.
2. Judgment Date
Courts sometimes fix the conversion at the judgment date, particularly when the claim is litigated entirely in lira. This intermediate approach partially updates the value but still leaves the creditor exposed to post-judgment depreciation.
3. Payment Date
Using the actual payment date fully preserves the real value of the receivable, as it neutralizes all intervening currency fluctuations. However, this approach requires explicit reservation of the right to calculate on that basis. Without a clear statement, enforcement offices may insist on the earlier date used in litigation.
4. Enforcement Date
For procedural purposes, some enforcement offices require the TRY equivalent to be based on the exchange rate on the day of filing (takip talebi tarihi). While this satisfies fee calculation requirements, it must be clarified in the petition that such conversion is for procedural calculation only and does not limit the substantive right to payment in the foreign currency or at the rate on the actual payment day.
VII. Judicial Approach and Trends
1. Recognition of Foreign-Currency Judgments
Turkish courts have become increasingly open to rendering judgments directly in foreign currency. Earlier reluctance — stemming from the view that all obligations must ultimately be payable in lira — has gradually faded, replaced by a pragmatic understanding that international commerce requires the enforcement of FX obligations in their original denomination.
Judgments therefore often order “payment of USD … together with legal interest in the same currency,” allowing enforcement without premature conversion.
2. Emphasis on the Creditor’s Election
Judicial practice emphasizes that once the creditor has elected either (a) payment in foreign currency or (b) the lira equivalent, that election binds later stages. Attempting to change from one form to another mid-proceeding is typically rejected as inconsistent.
This doctrine of binding election underscores the importance of precision in the first demand or statement of claim.
3. Enforcement Office Practice
Execution offices, while bound by judgments, still require a lira equivalent for operational reasons. Their practice has been to convert based on the official Central Bank selling rate on the day of collection, unless the creditor has explicitly demanded payment in the original currency and the debtor offers to pay in lira. The creditor may then reject such tender as non-conforming if the contract or judgment requires payment in the foreign currency itself.
VIII. Practical Drafting Recommendations
- Use explicit foreign-currency clauses: “Payment shall be made in USD without conversion into Turkish currency.”
- Reserve the right to payment in foreign currency at all stages: notices, pleadings, enforcement requests, and settlement negotiations should repeat this reservation verbatim.
- Align interest and currency: if principal is in USD, claim interest in USD pursuant to Law No. 3095 art. 4(a) or the contractual rate.
- Specify exchange-rate reference points: if conversion into lira is an alternative claim, state clearly whether the exchange rate is the maturity date or actual payment date.
- Clarify in enforcement requests that any TRY equivalent is “for fee calculation purposes only.”
- Document every exchange rate used in calculation and annex official Central Bank bulletins to avoid disputes.
- Monitor post-judgment interest accrual carefully; when enforcement is delayed, default interest should continue in the same currency until actual payment.
IX. Comparative Perspective: How Other Jurisdictions Handle Similar Risk
While Türkiye’s framework has its peculiarities, comparative insight helps understand global standards. In most civil-law jurisdictions — such as Germany and Switzerland — foreign-currency obligations are recognized as debts of value, payable in the nominated currency, with conversion permitted only upon payment. Common-law systems like England also respect currency-of-account clauses and typically render judgment in the same currency.
What distinguishes Türkiye is the statutory default right of conversion into lira and the corresponding procedural need to declare TRY equivalents during enforcement. Consequently, creditors in Türkiye must combine contractual precision with procedural vigilance to achieve outcomes comparable to those in fully convertible jurisdictions.
X. Risk Management in High-Volatility Environments
Given the lira’s historical volatility, legal precision alone may not suffice. Sophisticated creditors often combine contractual protection with financial hedging instruments such as forward contracts or options. From a legal standpoint, these financial tools do not alter the debtor’s obligation but mitigate the creditor’s exposure while the enforcement process unfolds.
However, where hedging is unavailable or uneconomical, procedural acceleration becomes the best protection: prompt filing, expedited service, and interim measures (such as attachment orders or precautionary liens) reduce the time window during which devaluation can erode value.
XI. Exchange-Rate Risk and Precautionary Measures in Enforcement
1. Precautionary Attachment (İhtiyati Haciz)
Creditors holding foreign-currency receivables often apply for precautionary attachment to secure assets before depreciation or dissipation. Since the attachment decision must state a monetary amount, the creditor should again express both the foreign-currency sum and the lira equivalent as of the application date, explicitly noting that the lira equivalent is temporary.
2. Sale and Distribution
If the debtor’s assets are sold for lira, the proceeds must later be converted to satisfy the FX judgment. In practice, enforcement offices use the Central Bank rate on the distribution date to determine equivalence. Timely objection and clarification by the creditor can prevent undervaluation at this stage.
XII. Currency Conversion in Insolvency and Concordat Proceedings
In insolvency (iflas) or concordat (konkordato) contexts, foreign-currency claims are registered by converting them into lira at the exchange rate on the filing date of the bankruptcy or concordat decision. While this simplifies administration, it inevitably fixes the creditor’s position against future devaluation. Creditors should therefore seek security or collateral indexed to foreign currency wherever possible, to counterbalance this statutory conversion effect.
XIII. Example Scenario: Quantifying Exchange-Rate Loss
Assume a supplier obtained judgment for EUR 200,000 on 1 January 2024. The debtor delays enforcement until 1 December 2025. The euro-lira rate moved from 30 TRY to 45 TRY during this period.
If the creditor’s enforcement documents had converted the claim at the judgment-date rate for administrative convenience and failed to preserve the right to payment in euros, the enforcement proceeds would be 6,000,000 TRY — even though the real market value at collection was 9,000,000 TRY.
The difference — 3,000,000 TRY, or 50% — represents a pure legal-drafting loss, not an economic inevitability. Proper reservation under TBK 99 and enforcement practice could have preserved full value.
XIV. The Role of Expert Evidence and Valuation
Where exchange-rate issues intersect with damage quantification or interest disputes, expert accounting reports play a key role. Courts often appoint experts to verify exchange-rate dates, interest calculations, and the relationship between contractual currency clauses and actual payment history.
To ensure accuracy, creditors should provide comprehensive financial documentation: Central Bank rate printouts, banking confirmations, and calculations that trace each currency conversion. This transparency not only accelerates proceedings but also prevents judicial misinterpretation that could trigger unwanted conversion.
XV. Digital Enforcement and Central Bank Integration
Recent reforms in the UYAP (National Judiciary Informatics System) have digitalized enforcement filings. Execution offices automatically access Central Bank rate data, reducing clerical errors but increasing the importance of how the creditor defines the relevant date. In electronic forms, the “exchange rate date” field must be filled manually; defaulting to the system date can inadvertently fix an unfavorable rate.
Therefore, legal representatives must supervise digital filings closely and, when necessary, submit supplementary petitions clarifying that the foreign-currency denomination governs the claim’s substance.
XVI. Exchange-Rate Clauses and Public-Policy Limitations
Although parties enjoy broad autonomy, Turkish law restricts foreign-currency usage in certain domestic contexts (e.g., residential leases or local labor contracts). These restrictions, imposed by Decree No. 32 on the Protection of the Value of Turkish Currency and related communiqués, do not generally apply to cross-border or export-related transactions but may limit internal contractual freedom.
However, once a valid foreign-currency obligation exists, courts and enforcement offices must respect it within the parameters of TBK 99. Public-policy considerations influence whether the contract may use FX, not how the resulting claim is collected.
XVII. Strategic Takeaways for Legal Practitioners
- Anticipate conversion issues at contract stage. The best litigation is the one you never need to correct; embed “effective payment in foreign currency” clauses.
- Control the narrative early. From the first demand letter onward, assert payment in FX to preserve TBK 99 rights.
- Draft pleadings with currency discipline. Every mention of TRY should be accompanied by a reservation that it is “for procedural purposes only.”
- Align all elements of the claim. Principal, interest, and exchange-rate date must form a coherent economic model.
- Educate enforcement offices. Attach legal reasoning and Central Bank evidence to avoid clerical conversions.
- Move swiftly. In high-volatility environments, procedural delay equals financial loss.
- Consider hedging or interim security. Legal precision can coexist with financial prudence.
XVIII. Conclusion
The collection stage of foreign-currency claims in Türkiye represents the decisive battlefield where contractual expectations meet procedural realities. While Turkish law provides a sophisticated framework under TBK Article 99 and Law No. 3095, the system places the burden of vigilance squarely on the creditor.
Exchange-rate risk is not purely economic; it is legal. The difference between full recovery and substantial loss often lies in a single line of drafting — whether in the contract, the petition, or the enforcement request.
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