Interest, Currency and Damages Calculations in Turkish Arbitration

Interest, currency and damages calculations in Turkish arbitration can determine the commercial value of an award as much as the tribunal’s decision on liability.

A claimant may prove that the respondent breached a contract but still recover substantially less than expected because it:

• Requested interest from the wrong date;
• Applied the wrong statutory rate;
• Converted a foreign-currency claim too early;
• Failed to distinguish principal from damages;
• Claimed lost profits without a reliable counterfactual;
• Double counted inflation, exchange-rate losses and interest;
• Failed to prove loss exceeding default interest;
• Submitted an operative request that could not be enforced clearly.

A respondent may also face an award significantly exceeding the original principal because several years of interest, exchange-rate changes and lost-profit calculations have accumulated.

These issues are especially important in long-running international disputes involving:

• Construction contracts;
• Share purchase agreements;
• Distribution and agency contracts;
• International sales;
• Loan agreements;
• Energy projects;
• Software projects;
• Maritime contracts;
• Insurance disputes;
• Shareholder and joint venture claims.

A tribunal must determine not only whether money is owed, but also:

1. The legal character of the amount;
2. The currency in which it is payable;
3. The date on which the obligation became due;
4. The date on which default began;
5. The applicable interest rate;
6. Whether interest is simple or compound;
7. Whether the claimant suffered additional loss;
8. The method used to calculate damages;
9. The date to which past loss is calculated;
10. How future loss is discounted.

Turkish arbitration law gives parties substantial procedural autonomy, but the tribunal must apply the substantive law governing the dispute. Where Turkish law governs, the principal framework includes the Turkish Code of Obligations, Turkish Commercial Code and Law No. 3095 on Statutory and Default Interest.

A major legislative change entered into force on 31 July 2026. Law No. 7589 replaced the fixed statutory-interest method under Article 1 of Law No. 3095 with a variable formula based on 80% of the Central Bank of the Republic of Türkiye’s short-term rediscount rate.

This article explains the calculation of principal, statutory interest, commercial default interest, foreign-currency claims, exchange-rate losses, lost profits, excess loss and post-award interest in Turkish arbitration.

Distinguishing Principal, Interest and Damages

The tribunal should begin by separating three categories.

Principal Debt

The principal is the primary monetary obligation.

Examples include:

• An unpaid invoice;
• A loan instalment;
• A contractual purchase price;
• An unpaid royalty;
• A shareholder loan;
• A certified construction payment;
• A refundable advance.

Interest

Interest compensates the creditor for being deprived of money or constitutes the agreed price for the use of capital.

It may be:

• Contractual interest;
• Statutory interest;
• Default interest;
• Commercial default interest;
• Foreign-currency interest;
• Post-award interest.

Damages

Damages compensate loss caused by breach, tort or another legally recognised basis.

They may include:

• Actual loss;
• Lost profit;
• Delay damages;
• Replacement costs;
• Wasted expenditure;
• Financing costs;
• Currency-related excess loss;
• Business interruption;
• Diminution in value.

These categories should not be combined indiscriminately.

For example, an unpaid EUR 1 million invoice is principal. Interest arising because payment was late is an accessory claim. Loss caused by the creditor having to obtain an emergency loan at a higher rate may constitute additional damages if the applicable requirements are proved.

Applicable Law and Party Autonomy

The parties may determine the law governing their contract and the arbitral procedure, subject to mandatory rules.

Where Turkish law governs the merits, interest and damages questions are ordinarily determined under Turkish substantive law. International Arbitration Law No. 4686 allows parties to select procedural rules directly or through institutional arbitration rules, but the tribunal must decide the merits according to the applicable substantive law and the parties’ agreement.

The tribunal should distinguish:

• Law governing the main contract;
• Law governing the arbitration agreement;
• Procedural law of the seat;
• Law governing interest;
• Law of the enforcement jurisdiction.

A contract governed by English law but arbitrated in Istanbul does not automatically make Turkish substantive interest rules applicable to the debt.

Conversely, a Turkish-law contract may remain subject to Turkish interest and damages rules even where the arbitration is seated abroad.

When Does Default Begin?

Interest calculations cannot be completed correctly unless the date of default is identified.

Article 117 of the Turkish Code of Obligations provides that the debtor of a due obligation generally falls into default upon receiving the creditor’s notice.

A separate notice is unnecessary where the performance date was agreed by the parties or properly determined through a contractual mechanism. In that situation, default begins when the fixed date passes. In tort claims, default ordinarily begins when the wrongful act occurs; in unjust enrichment, it generally begins when the enrichment occurs, subject to the statutory exception for a good-faith recipient.

Accordingly, the relevant date may be:

• Contractual due date;
• Date stated in an invoice;
• Date of a valid payment demand;
• Date of a notice of default;
• Date of termination;
• Date of the wrongful act;
• Date arbitration was commenced;
• Date of the award.

A claimant should not request interest merely “from the date of the dispute.”

It should identify the legal event that placed the debtor in default.

Fixed Maturity Dates

Where the contract states that payment is due on a specific date, a separate demand may not be necessary.

Examples include:

• “Payment shall be made on 30 September 2026”;
• “The invoice is payable within 30 days of receipt”;
• “The final instalment is due five business days after closing”;
• “Royalties are payable on the fifteenth day following each quarter.”

The claimant should still prove:

• The event activating the due date;
• Delivery or receipt of the invoice where relevant;
• Completion of any conditions precedent;
• Calculation of the maturity date;
• Absence of a valid suspension or set-off.

Where the due date depends on certification, acceptance or delivery of supporting documents, default may not begin until those contractual conditions are satisfied.

Current Statutory Interest Rate in Turkey

Law No. 7589, published on 31 July 2026, materially changed Article 1 of Law No. 3095.

Where interest must be paid under the Turkish Code of Obligations or Turkish Commercial Code but the parties have not agreed on the rate, the annual statutory rate is now calculated at 80% of the Central Bank’s short-term rediscount rate applicable on 31 December of the preceding year.

If the rediscount rate applicable on 30 June differs by at least five percentage points from the previous 31 December rate, the rate calculated using 30 June applies during the second half of the year.

The Central Bank’s official table shows that the rediscount rate in force on 31 December 2025 was 38.75%. The same rate remained applicable on 30 June 2026 because no intervening change was recorded after 20 December 2025.

Accordingly, as of 6 August 2026, the statutory interest rate produced by the new formula is:

38.75% × 80% = 31.00% per year.

This 31% result is a calculation based on the new statutory formula and the Central Bank’s published rate. It should be verified again whenever the relevant calendar year or Central Bank rate changes.

Effect of the 31 July 2026 Amendment

The amendment entered into force on the date of publication because Article 26 of Law No. 7589 provides that provisions other than the specifically postponed articles become effective upon publication. The amendment to Law No. 3095 was Article 10 and was not among the postponed provisions.

An arbitration involving periods before and after 31 July 2026 may therefore require a segmented interest calculation.

The tribunal may need to determine:

• The rate applicable before 31 July 2026;
• The rate applicable from 31 July 2026;
• Whether a contractual rate overrides the statutory rate;
• Whether the claim is commercial;
• Whether the parties requested a particular rate;
• Whether transitional or accrued-right principles affect the calculation.

A calculation applying 31% retrospectively to every historical period without analysis may be incorrect.

Default Interest under Law No. 3095

Article 2 of Law No. 3095 provides that a debtor in default concerning a monetary obligation must ordinarily pay default interest at the rate established under Article 1 unless the parties agreed otherwise. The same provision permits a higher Central Bank short-term advance rate to be requested for commercial matters when that rate exceeds the ordinary statutory rate.

The Central Bank’s official table shows that the advance rate in force since 20 December 2025 is 39.75%.

Consequently, as of 6 August 2026:

• The newly calculated general statutory rate is 31%;
• The published Central Bank advance rate is 39.75%;
• In qualifying commercial matters, the higher advance rate may be requested under Article 2 of Law No. 3095.

The claimant should request the commercial rate expressly and establish that the underlying transaction is commercial.

An award should not merely state “commercial interest” without identifying the applicable statutory basis and calculation method.

Late Payment in Commercial Supply Transactions

A separate rule applies to qualifying late payments for goods and services under Article 1530 of the Turkish Commercial Code.

The Central Bank’s official table states that, from 1 January 2026, the default interest rate for late payment in covered goods and services transactions is 43%, while the minimum compensation amount for recovery costs is TRY 2,020.

This rate should not be applied automatically to every commercial arbitration.

The tribunal should determine whether:

• The claim arises from a supply of goods or services;
• Article 1530 applies to the parties and transaction;
• The contractual rate is valid;
• The debtor’s delay falls within the statutory regime;
• The claimant requested the statutory recovery amount.

A construction damages claim or shareholder dispute does not become an Article 1530 late-payment case merely because both parties are companies.

Contractual Interest

Parties commonly agree on an interest rate in the contract.

Examples include:

• “EURIBOR plus 4%”;
• “SOFR plus 350 basis points”;
• “1.5% per month”;
• “The Central Bank advance rate”;
• “The highest lawful commercial default rate”;
• “12% simple interest per annum.”

The clause should address:

• Whether the rate applies before or after default;
• Whether it is fixed or variable;
• The benchmark;
• The applicable margin;
• Reset dates;
• Day-count convention;
• Business-day rules;
• Simple or compound calculation;
• Replacement of a discontinued benchmark.

A contractual interest clause must also be assessed under mandatory Turkish limitations where Turkish law applies.

Article 120 of the Turkish Code of Obligations states that, where a contractual default rate is agreed, it may not exceed twice the statutory annual rate determined under the first paragraph. It also provides that where contractual interest is higher than the statutory default rate but no separate default rate was agreed, the contractual interest rate applies during default.

The Turkish Commercial Code separately states that interest rates may be determined freely in commercial matters. It also recognises only limited circumstances in which interest may be capitalised.

The interaction between commercial freedom under the Turkish Commercial Code and the limitations in the Turkish Code of Obligations may require transaction-specific legal analysis. The tribunal should avoid assuming that every rate agreed between commercial parties is automatically valid or automatically capped.

Relevant factors include:

• Whether both parties are merchants;
• Whether the transaction is commercial for both;
• Whether special banking legislation applies;
• Whether the debtor is a consumer;
• Whether the clause is a negotiated term;
• Whether the rate creates a penalty rather than genuine interest;
• Whether public policy or mandatory rules apply.

Simple and Compound Interest

Simple interest is calculated only on principal.

Compound interest is calculated by adding accrued interest to principal so that later interest is charged on the combined amount.

Turkish law generally restricts compound interest.

Article 121 of the Turkish Code of Obligations states that default interest cannot itself be subjected to additional default interest.

Article 8 of the Turkish Commercial Code permits contractual capitalisation at intervals of no less than three months only in:

• Current-account relationships; and
• Loan agreements that are commercial for both parties,

provided that the contracting parties qualify as merchants. Interest imposed contrary to these restrictions is treated as legally ineffective.

A tribunal should therefore distinguish among:

• Simple default interest;
• Contractually capitalised loan interest;
• Current-account balances;
• Interest on costs;
• Post-award interest;
• Prohibited interest on default interest.

International contracts sometimes provide for monthly compounding without examining Turkish mandatory rules. Such a clause should not be enforced automatically.

Foreign-Currency Obligations

Article 99 of the Turkish Code of Obligations regulates debts expressed in foreign currency.

Where payment in a foreign currency is agreed, the debtor may generally pay the Turkish-lira equivalent at the exchange rate applicable on the payment date unless the contract requires payment in the foreign currency itself through an “actual payment,” “payment in kind” or equivalent clause.

Where the debt was not paid on time and no mandatory foreign-currency payment clause exists, the creditor may demand:

• Payment in the foreign currency itself;
• The Turkish-lira equivalent based on the maturity-date exchange rate; or
• The Turkish-lira equivalent based on the actual payment-date exchange rate.

This choice can have major financial consequences during periods of currency volatility.

True and Alternative Foreign-Currency Debts

A contract should state whether the foreign-currency obligation is a true foreign-currency debt requiring payment in that currency or an alternative debt that may be discharged in Turkish lira.

A clause may state:

“All payments shall be made in euros, in the agreed currency, without conversion into Turkish lira.”

Where a mandatory payment-in-kind clause is valid, the creditor may request an award in the original currency.

Where the contract permits Turkish-lira payment, the award should identify the applicable conversion option clearly.

An unclear award stating “the EUR amount or its Turkish-lira equivalent” without identifying the relevant date may create enforcement disputes.

Interest on Foreign-Currency Claims

Article 4/A of Law No. 3095 provides that where a higher contractual interest or default rate has not been agreed, the applicable interest on a foreign-currency debt is the highest rate paid by state banks on one-year deposit accounts opened in that currency.

This means that a EUR claim, USD claim and GBP claim may carry different statutory rates.

The claimant should provide evidence concerning:

• Relevant state banks;
• Currency;
• One-year deposit product;
• Applicable period;
• Highest rate actually paid;
• Changes during the period.

The tribunal should not apply the Turkish-lira advance rate automatically to a claim that remains denominated in foreign currency.

Choosing the Exchange-Rate Date

Potential conversion dates include:

• Contract date;
• Invoice date;
• Due date;
• Default date;
• Termination date;
• Arbitration filing date;
• Award date;
• Actual payment date.

The correct date depends on:

• Contract wording;
• Article 99;
• Nature of the claim;
• Currency requested;
• Damages methodology;
• Procedural request.

A claimant should avoid converting every loss into Turkish lira at the filing date merely for convenience.

Where costs were incurred in different currencies and on different dates, each cost may require conversion using the rate applicable when the expenditure was incurred.

Central Bank Exchange Rates

The parties should agree or request a reliable exchange-rate source.

Possible sources include:

• Central Bank indicative buying rate;
• Central Bank indicative selling rate;
• Actual bank transaction rate;
• Contractually defined rate;
• Bloomberg or Refinitiv market rate;
• Average daily rate;
• Spot rate on a specified date.

The award should identify whether it uses:

• Buying or selling rate;
• Effective or foreign-exchange rate;
• Opening or closing rate;
• Daily or monthly average;
• Business-day adjustment.

A statement such as “converted at the official rate” may be too vague for enforcement.

Currency Loss and Default Interest

A creditor may suffer currency depreciation exceeding the default interest awarded.

Turkish law addresses this issue through the concept of excess loss, also known as aşkın zarar.

Article 122 of the Turkish Code of Obligations provides that where the creditor suffers loss exceeding default interest, the debtor must compensate that additional loss unless it proves that it was not at fault in entering default.

Where the amount can be determined within the pending proceedings, the decision-maker may award excess loss together with the main claim upon request.

Excess loss is not automatically equal to inflation or exchange-rate depreciation.

The claimant should prove its own concrete financial loss.

Examples may include:

• A replacement loan obtained at a higher rate;
• A foreign-currency payment obligation that became more expensive;
• Loss caused by inability to purchase replacement goods;
• Financing costs exceeding default interest;
• A documented investment or business opportunity lost because of non-payment.

The tribunal should prevent double recovery where the claimant already receives foreign-currency principal, foreign-currency interest and a separate exchange-rate claim.

Contractual Damages under Turkish Law

Article 112 of the Turkish Code of Obligations provides that where an obligation is not performed or is performed improperly, the debtor must compensate the resulting damage unless it proves that no fault can be attributed to it.

Contract damages may protect different interests.

Expectation or Positive Loss

Expectation loss aims to place the claimant in the financial position it would have occupied if the contract had been performed properly.

It may include:

• Lost contract profit;
• Cost of replacement performance;
• Loss caused by delay;
• Lost resale margin;
• Completion cost;
• Diminution in value.

Reliance or Negative Loss

Reliance loss aims to place the claimant in the position it would have occupied if it had not relied on the ineffective or terminated contractual relationship.

It may include:

• Negotiation expenses;
• Mobilisation costs;
• Preliminary investments;
• Wasted professional fees;
• Costs incurred in reliance on contract formation.

The claimant should avoid combining expectation and reliance damages in a way that places it in a better position than full contractual performance would have produced.

Actual Loss

Actual loss represents a reduction in the claimant’s existing assets or an increase in liabilities.

Examples include:

• Repair costs;
• Replacement purchases;
• Additional labour;
• Storage;
• Demobilisation;
• Third-party payments;
• Emergency financing;
• Remediation;
• Rebranding;
• Data restoration;
• Expert and investigation costs.

Each amount should be supported through:

• Invoices;
• Payment records;
• Contracts;
• Payroll records;
• Bank statements;
• Accounting entries;
• Expert evidence.

An unpaid invoice alone does not prove that every related expenditure was caused by the respondent’s breach.

Lost Profits

Lost profit is the net financial benefit the claimant would probably have earned but for the breach.

It is not the same as lost revenue.

A proper lost-profit calculation generally deducts costs that would have been incurred to generate the revenue, including:

• Materials;
• Labour;
• Freight;
• Sales commission;
• Tax where relevant;
• Variable overhead;
• Financing;
• Avoided operating expenses.

The tribunal should test:

• Whether the opportunity was sufficiently probable;
• Whether capacity existed;
• Whether customers were available;
• Whether regulatory approval was required;
• Whether competitors could have taken the business;
• Whether the claimant had a reliable performance history;
• Whether the projection is supported by contemporaneous documents.

A start-up or new project may still prove lost profits, but projections require careful sensitivity analysis.

Burden and Standard of Proof

Article 50 of the Turkish Code of Obligations places the burden of proving damage and fault on the injured party in tort-based claims.

Where the exact amount cannot be proved, the decision-maker may determine damages equitably by considering the ordinary course of events and the measures taken by the injured party. Articles 51 and 52 also permit consideration of fault, circumstances, contributory conduct and failure to prevent the loss from increasing. These principles are applicable by analogy to contractual liability through Article 114.

This does not remove the claimant’s obligation to present evidence.

The tribunal’s equitable assessment is not a licence to select an arbitrary figure.

The award should explain:

• Which loss was proved;
• Which elements were uncertain;
• Which assumptions were adopted;
• Why the selected amount is reasonable;
• Which amounts were reduced;
• Whether contributory conduct affected recovery.

Common Damages Valuation Methods

Before-and-After Method

The expert compares the claimant’s performance before and after the breach.

This method may be useful for established businesses but must control for:

• Market changes;
• Inflation;
• Seasonality;
• New competition;
• Exchange rates;
• Changes in demand;
• Internal management problems.

But-for Projection

The expert constructs the financial position that would probably have existed without the breach.

The model should be based on contemporaneous budgets, contracts, customer data and operational capacity rather than litigation-driven assumptions.

Comparable Company or Transaction Method

The expert uses comparable businesses, licences, transactions or market multiples.

The comparables should be genuinely similar in:

• Geography;
• Size;
• Risk;
• Growth;
• Industry;
• Contract duration;
• Market conditions.

Discounted Cash Flow

Future cash flows are forecast and discounted to present value.

Key disputed variables may include:

• Revenue growth;
• Profit margin;
• Discount rate;
• Terminal value;
• Project duration;
• Country risk;
• Currency risk.

A small change in these inputs can alter damages dramatically.

Cost-Based Method

The claimant seeks wasted or replacement costs.

This method may be appropriate for defective works, software remediation, rebranding or replacement procurement.

Cost is not always equal to economic loss. The claimant should prove that the expenditure was necessary, reasonable and caused by the breach.

Valuation Date

The tribunal should identify the valuation date explicitly.

Potential dates include:

• Date of breach;
• Date of termination;
• Date of loss;
• Date of claim;
• Date of award;
• Hypothetical contractual completion date.

The valuation date affects:

• Available information;
• Currency conversion;
• Discounting;
• Interest;
• Foreseeability;
• Mitigation.

The tribunal should also determine whether later events may be used as evidence of what was reasonably foreseeable at the valuation date.

Past and Future Loss

Past loss has occurred by the date of valuation.

Future loss is expected to occur after that date.

Future loss should ordinarily be discounted because receiving money today is economically more valuable than receiving the same nominal amount in the future.

A damages model should not both:

• Discount future cash flows to the award date; and
• Add pre-award interest as though the discounted amount had been due years earlier.

That would risk double counting the time value of money.

Mitigation of Loss

An injured party must take reasonable measures to prevent avoidable loss.

Possible mitigation steps include:

• Purchasing replacement goods;
• Appointing another contractor;
• Reselling inventory;
• Seeking alternative customers;
• Repairing a defect;
• Continuing part of the project;
• Preserving evidence;
• Recovering from insurance.

The respondent must identify a realistic mitigation measure rather than relying on a general allegation that the claimant “could have reduced the loss.”

The claimant is not normally required to take extraordinary commercial risks or accept a materially inferior substitute.

Contributory Conduct

Article 52 allows damages to be reduced or eliminated where the injured party consented to the harmful conduct, contributed to the occurrence or increase of loss or aggravated the liable party’s position.

In arbitration, contributory conduct may include:

• Late approvals;
• Defective specifications;
• Failure to provide access;
• Failure to notify defects;
• Continuing an uneconomic project;
• Rejecting a reasonable replacement;
• Withholding necessary data;
• Failing to preserve subrogation or recourse rights.

The tribunal should distinguish contributory fault from separate contractual breaches and set-off claims.

Contractual Penalties and Liquidated Damages

Commercial agreements frequently include pre-agreed amounts for:

• Delay;
• Performance shortfalls;
• Breach of exclusivity;
• Confidentiality violations;
• Late delivery;
• Failure to meet minimum purchases.

The tribunal should determine whether the clause is:

• A genuine liquidated-damages provision;
• A contractual penalty;
• A limitation of liability;
• An exclusive remedy;
• An amount payable in addition to actual damages.

It should also consider:

• Whether actual loss must be proved;
• Whether the clause permits additional damages;
• Whether the amount is excessive;
• Whether the debtor is a merchant;
• Whether mandatory reduction rules apply.

A claim for both the full contractual penalty and the same lost profit may create double recovery unless the agreement and applicable law permit cumulative remedies.

Set-Off and Partial Payments

Interest should be calculated on the outstanding principal after valid payments, credits and set-off.

A calculation should identify:

• Payment date;
• Amount;
• Currency;
• Applicable exchange rate;
• Whether the payment was allocated to expenses, interest or principal;
• Whether the creditor accepted a different allocation.

Article 100 of the Turkish Code of Obligations regulates allocation of partial payments where interest and expenses are outstanding.

The expert should not calculate interest on principal that had already been paid.

Where payment was made in another currency, the conversion methodology should be explained.

Pre-Award and Post-Award Interest

Pre-Award Interest

Pre-award interest runs before the arbitral award.

Its purpose is generally to compensate the claimant for being deprived of money during the period before the award.

The starting date may be:

• Contractual maturity;
• Default notice;
• Breach;
• Termination;
• Date of expenditure;
• Arbitration filing.

Post-Award Interest

Post-award interest runs after the award until payment.

It encourages timely compliance and compensates the creditor for continued non-payment.

The award should state:

• Principal carrying post-award interest;
• Whether costs also carry interest;
• Rate;
• Currency;
• Starting date;
• Ending event;
• Simple or compound basis.

An award stating only that “statutory interest shall apply” may become difficult to calculate where statutory rates change.

Interest on Costs

A party may request interest on:

• Arbitration costs;
• Legal fees;
• Expert fees;
• Amounts paid as the opponent’s advance;
• Court-related expenses.

The tribunal should determine when the obligation to reimburse costs becomes due.

Possible dates include:

• Date the cost was incurred;
• Date of the final cost submission;
• Date of the award;
• Date fixed for voluntary payment.

Awarding interest from the date of the award is often easier to administer, but the legal basis and the parties’ requests remain important.

Avoiding Double Recovery

Double recovery can occur where the same economic loss is compensated through several labels.

Common examples include:

• Foreign-currency principal plus full exchange-rate loss;
• Lost profits plus lost business value;
• Replacement cost plus diminution in value;
• Default interest plus the same financing cost as damages;
• Contractual penalty plus identical actual loss;
• Gross revenue plus costs that were avoided;
• Pre-award interest on a future loss already discounted to present value.

The damages expert should provide a reconciliation table showing how each category relates to the others.

The award should explain which claims are alternative and which are cumulative.

Preparing Quantum Evidence

A claimant should submit:

• Detailed damages schedule;
• Calculation workbook;
• Source documents;
• Explanation of formulas;
• Currency and exchange-rate sources;
• Interest-rate history;
• Assumptions;
• Sensitivity analysis;
• Mitigation evidence;
• Reconciliation with financial statements.

A respondent should test:

• Causation;
• Assumptions;
• Arithmetic;
• Duplication;
• Avoided costs;
• Capacity constraints;
• Market changes;
• Currency treatment;
• Discount rate;
• Tax treatment;
• Mitigation.

Experts should not hide key assumptions inside inaccessible spreadsheets.

Drafting the Operative Part of the Award

A monetary award should be capable of calculation without a new dispute.

A clear operative provision may state:

“The Respondent shall pay the Claimant EUR 2,500,000 as principal. Simple default interest shall accrue on that amount from 15 March 2025 until the date of actual payment at the highest annual interest rate paid by Turkish state banks on one-year EUR deposit accounts applicable during each relevant period.”

For a Turkish-lira commercial claim:

“The Respondent shall pay TRY 10,000,000, together with simple commercial default interest at the rate applicable under Article 2 of Law No. 3095 from 1 August 2026 until actual payment.”

Where the tribunal uses a fixed rate, it should state whether the rate remains fixed or changes with the statutory benchmark.

The award should also identify:

• Whether the amount includes VAT;
• Whether tax withholding is permitted;
• Whether previous payments are deducted;
• Whether liability is joint or several;
• Whether interest applies to costs;
• Payment deadline.

Correction and Additional Awards

A calculation error may be corrected under the applicable arbitration rules and International Arbitration Law.

International Arbitration Law permits correction of material errors, interpretation of the award and an additional award for claims presented but not decided, subject to the statutory procedure and time limits.

A request to correct arithmetic is different from an attempt to reopen the merits.

Parties should review the award promptly for:

• Mathematical errors;
• Wrong dates;
• Incorrect currency symbols;
• Omitted interest periods;
• Omitted claims;
• Inconsistency between reasoning and operative part.

Recognition and Enforcement

Foreign arbitral awards may be enforced in Turkey under the New York Convention and Law No. 5718.

Law No. 5718 permits enforcement of foreign awards that are final, enforceable or binding and identifies the competent court and required documents.

A court should not normally recalculate the merits of damages.

However, unclear, contradictory or impossible monetary orders may create practical enforcement problems.

Potential difficulties include:

• No identifiable interest rate;
• No commencement date;
• Unspecified exchange-rate date;
• Unclear currency option;
• Compound interest prohibited by mandatory law;
• Damages exceeding the claim submitted;
• Relief outside the arbitration agreement;
• Conflict with public policy.

A well-reasoned and mathematically precise award is therefore more enforceable than a broad order requiring the enforcement authority to determine the amount independently.

Sample Interest and Currency Clause

“All amounts payable under this Agreement shall be denominated and paid in euros. Payment shall be made in the agreed currency and may not be discharged through payment of the Turkish-lira equivalent unless the receiving Party agrees in writing.

Any amount not paid on its due date shall bear simple default interest from the due date until actual payment at the rate of EURIBOR for the relevant interest period plus four percentage points per annum. If EURIBOR is unavailable or permanently discontinued, the tribunal shall apply the replacement benchmark formally designated for comparable euro-denominated commercial transactions, together with the agreed margin.

Interest shall be calculated on the basis of the actual number of days elapsed and a 365-day year. Interest shall not be compounded except to the extent expressly permitted by the mandatory law applicable to the obligation.

Payment of default interest shall not prevent the creditor from claiming proven loss exceeding such interest where the applicable law permits.”

Sample Damages Clause

“The breaching Party shall compensate the non-breaching Party for direct loss, reasonable replacement costs and net lost profit caused by the breach, subject to the limitations stated in this Agreement.

Lost profit shall be calculated by deducting costs that would have been incurred to generate the relevant revenue. The claimant shall take reasonable steps to mitigate its loss. No Party shall recover the same economic loss more than once under different categories of relief.

Contractual penalties, service credits and liquidated damages shall be treated as cumulative with or exclusive of actual damages only as expressly stated in the relevant provision.”

Practical Checklist for Claimants

Before submitting an interest and damages claim, the claimant should determine:

• Currency of principal;
• Whether actual foreign-currency payment was agreed;
• Due date;
• Default date;
• Valid notice;
• Contractual interest;
• Applicable statutory rate;
• Whether the claim is commercial;
• Whether Article 1530 applies;
• Whether foreign-currency deposit interest applies;
• Whether excess loss exists;
• Valuation date;
• Damages method;
• Avoided costs;
• Mitigation;
• Exchange-rate source;
• Pre-award interest;
• Post-award interest;
• Interest on costs;
• Double-recovery risks.

Practical Checklist for Respondents

The respondent should examine:

• Whether default began on the claimed date;
• Whether conditions precedent were satisfied;
• Whether the wrong interest regime was used;
• Whether contractual interest is valid;
• Whether compound interest is prohibited;
• Whether the foreign-currency claim was converted incorrectly;
• Whether the claimant proved individual excess loss;
• Whether lost profits are speculative;
• Whether avoided costs were deducted;
• Whether later events distorted the valuation;
• Whether loss was mitigated;
• Whether the same loss was claimed twice;
• Whether the claim exceeds the requested relief.

Frequently Asked Questions

What is the current statutory interest rate in Turkey?

Following Law No. 7589, the rate is calculated annually as 80% of the Central Bank rediscount rate applicable on the preceding 31 December, subject to a possible second-half adjustment. Based on the 38.75% rate applicable on 31 December 2025, the calculated rate is 31% as of 6 August 2026.

When did the new interest formula enter into force?

The amendment was published and entered into force on 31 July 2026.

What is the current commercial advance interest rate?

The Central Bank’s published short-term advance rate has been 39.75% since 20 December 2025. It may be requested in qualifying commercial default claims under Article 2 of Law No. 3095.

What is the 2026 rate for late commercial supply payments?

The Central Bank publishes a 43% rate effective from 1 January 2026 for qualifying late payments under Article 1530 of the Turkish Commercial Code, together with a TRY 2,020 minimum recovery amount.

Does every commercial dispute receive 43% interest?

No. The 43% rate concerns the statutory late-payment regime for qualifying goods and services transactions. Other commercial disputes may fall under contractual interest, Law No. 3095 or another special rule.

When does default interest begin?

It generally begins after a due obligation and valid notice. Notice is unnecessary where the payment date was fixed contractually.

Can the parties agree on a higher interest rate?

Potentially, but the contractual rate must be assessed under the Turkish Code of Obligations, Turkish Commercial Code and any special legislation applicable to the transaction.

Is compound interest permitted?

Only in limited commercial situations, principally qualifying current accounts and commercial loans between merchants, with capitalisation periods of at least three months. Default interest cannot ordinarily generate additional default interest.

Which interest applies to a USD or EUR claim?

Unless the parties agreed on a higher contractual rate, Article 4/A of Law No. 3095 applies the highest rate paid by state banks on one-year deposit accounts in the relevant currency.

Can a creditor request Turkish lira instead of foreign currency?

Where mandatory payment in the foreign currency was not agreed, Article 99 may permit payment or recovery in Turkish lira using the relevant statutory exchange-rate option.

Can the claimant choose the actual payment-date exchange rate?

Where the foreign-currency debt was not paid on time and no actual-payment clause exists, Article 99 gives the creditor specified choices that may include the actual payment-date rate.

Is exchange-rate depreciation automatically recoverable as damages?

No. The claimant must avoid double recovery and prove the legal and factual basis of any loss exceeding the foreign-currency principal and awarded interest.

What is excess loss?

Excess loss is proven damage exceeding default interest. Article 122 permits recovery unless the debtor proves absence of fault in entering default.

Can lost profits be awarded?

Yes, where breach, causation and a sufficiently reliable amount are proved. The calculation should deduct avoided costs and account for mitigation.

What happens if the exact loss cannot be proved?

The tribunal applying Turkish law may estimate the amount equitably by considering the ordinary course of events and the measures taken by the claimant, provided that a sufficient factual basis exists.

Does interest apply to future damages?

Future damages must first be valued appropriately, usually through discounting. Additional interest should not duplicate the time value already reflected in that calculation.

Can interest be awarded on arbitration costs?

Potentially, depending on the governing law, institutional rules, the parties’ requests and the date on which reimbursement becomes due.

Can a foreign award containing interest be enforced in Turkey?

Yes, subject to the applicable enforcement framework. The monetary order should identify the rate, period, currency and calculation method clearly.

Conclusion

Interest, currency and damages calculations in Turkish arbitration require legal, accounting and economic analysis.

A successful liability argument does not automatically produce a commercially adequate award.

The claimant must identify the principal, currency, due date, default date, applicable rate and damages methodology with precision.

The 31 July 2026 amendment to Law No. 3095 is particularly important.

The ordinary statutory interest rate is no longer based on a permanently fixed percentage. It is calculated through a variable formula using 80% of the Central Bank rediscount rate and may be revised during the second half of the year when the statutory conditions are met. Based on the currently published Central Bank rate, the calculated annual rate is 31% as of 6 August 2026.

Commercial disputes require additional distinctions.

The Central Bank advance rate may be requested in qualifying commercial defaults, while Article 1530 establishes a separate late-payment regime for specified goods and services transactions.

Foreign-currency claims require a different analysis.

The parties should determine whether payment must be made in the agreed currency and whether conversion into Turkish lira is permitted. Where no higher contractual rate exists, foreign-currency interest may be based on the highest one-year deposit rate paid by state banks for the relevant currency.

Damages must be proved independently from interest.

Actual loss should be documented through reliable records. Lost profit should reflect net profit rather than revenue and should be supported by a credible counterfactual. Future losses must be discounted, avoided costs deducted and mitigation considered.

Excess loss should not be presumed merely from inflation or currency depreciation. The claimant should prove its individual loss exceeding default interest and explain why that amount is not already compensated through the principal, currency selection or awarded interest.

Arbitral tribunals should also avoid double recovery.

Currency loss, financing cost, default interest, lost profit, contractual penalties and diminution in value may overlap. The award should explain which amounts are cumulative, which are alternative and which have been rejected as duplicative.

The operative part of the award must be mathematically enforceable.

It should state the principal, currency, interest rate, starting date, ending event, calculation basis and treatment of costs. An award that leaves these matters uncertain may generate a new dispute during enforcement.

Careful pleading, transparent expert models and precise award drafting allow arbitration to compensate the actual economic consequences of breach without producing speculative or duplicative recovery.

Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Interest and damages depend on the governing law, contract, commercial character of the transaction, default date, currency, applicable statutory rates, evidence, valuation date and requested relief. The rates and legislation in force should be verified for the relevant calculation period before filing an arbitration claim or preparing an award.