Interest, Foreign Currency and Damages in Turkish Arbitration Awards

Introduction

The monetary section of an arbitral award is often more difficult to draft than the tribunal’s decision on liability. A tribunal may correctly conclude that a contract was breached but still create significant uncertainty if the award does not state clearly:

• The currency in which payment must be made;
• Whether payment in Turkish lira is permitted;
• The applicable exchange-rate date;
• The type and rate of interest;
• The date from which interest begins;
• Whether interest continues until full payment;
• Whether interest is simple or compound;
• Which categories of damages have been awarded;
• How arbitration costs are allocated.

These issues become particularly important in international transactions involving Türkiye because contracts frequently contain obligations denominated in US dollars, euros, pounds sterling or another foreign currency. Exchange-rate movements, inflation, delayed payment and financing costs may substantially affect the commercial value of the claim.

A claimant that requests only the principal amount may lose the economic benefit of its award if payment occurs years later. Conversely, a claimant that combines foreign-currency conversion, default interest, currency-loss damages and lost-profit claims without a coherent methodology may seek double recovery.

Interest, foreign currency and damages in Turkish arbitration awards must therefore be addressed from the beginning of the arbitration. The statement of claim should identify the requested currency, interest basis, default date, damages methodology and alternative relief. The tribunal should then issue an operative section that can be understood and enforced without reopening the merits.

This guide examines:

• Foreign-currency obligations under Turkish law;
• Payment in foreign currency or Turkish lira;
• Exchange-rate dates;
• Contractual and statutory interest;
• Default interest;
• Foreign-currency interest;
• Compound interest;
• Post-award interest;
• Actual loss and lost profit;
• Excess loss caused by delayed payment;
• Contractual penalties;
• Expert calculation of damages;
• Correction and supplementation of awards;
• Annulment and enforcement risks.

The Importance of the Governing Law

The calculation of monetary relief may involve several different legal systems.

Substantive law

The substantive law governing the contract ordinarily determines matters such as:

• The existence of the debt;
• Currency of the obligation;
• Contractual interest;
• Default;
• Recoverable damages;
• Causation;
• Mitigation;
• Contractual penalties;
• Limitation of liability.

Where Turkish law governs the merits, the Turkish Code of Obligations, Turkish Commercial Code and Law No. 3095 on Legal Interest and Default Interest may be particularly relevant.

Law of the arbitration seat

The law of the seat regulates the arbitral procedure and the validity of the award.

For a Türkiye-seated domestic arbitration, Articles 407 to 444 of the Turkish Code of Civil Procedure generally apply. For a qualifying international arbitration, International Arbitration Law No. 4686 may apply.

These laws regulate matters including:

• Content of the award;
• Tribunal authority;
• Correction and supplementation;
• Set-aside proceedings;
• Public policy;
• Procedural equality.

Institutional rules

The selected arbitration rules may regulate:

• The form and reasoning of the award;
• Arbitration costs;
• Correction and interpretation;
• Supplementary awards;
• Interest-related procedural requests;
• Scrutiny or institutional review.

Under the ISTAC Arbitration Rules, the tribunal applies the rules of law selected by the parties. In the absence of a choice, it applies the rules of law it considers appropriate. A tribunal may decide according to equity only where the parties expressly authorise it to do so.

Enforcement law

The law of the country where enforcement is sought may determine:

• The currency used in the enforcement order;
• The applicable conversion mechanism;
• Attachment procedures;
• Calculation of continuing interest;
• Treatment of taxes and enforcement expenses.

Parties should not assume that every enforcement system converts a foreign-currency award in the same manner.

Types of Monetary Relief in Arbitration

An arbitral award may include several different categories of monetary relief.

Principal debt

The principal may consist of:

• Unpaid contract price;
• Outstanding invoice;
• Loan principal;
• Purchase price;
• Royalty;
• Rent;
• Commission;
• Retained payment;
• Reimbursement obligation.

Damages

Damages may include:

• Repair costs;
• Replacement costs;
• Additional expenditure;
• Lost profit;
• Loss of business value;
• Delay loss;
• Financing costs;
• Wasted expenditure;
• Loss caused by wrongful termination.

Restitution

A tribunal may order repayment of money transferred under an invalid, rescinded or terminated agreement.

Contractual penalty

A contract may establish a penalty for delay, non-performance, breach of confidentiality, violation of exclusivity or another contractual default.

Interest

Interest may be claimed on:

• The principal debt;
• Damages;
• Costs;
• An unpaid contractual penalty;
• A post-award obligation.

Each category should be pleaded and decided separately. The tribunal should avoid presenting one undifferentiated total that prevents the parties and enforcing authorities from understanding how the amount was calculated.

The Claimant Must Define the Requested Relief

A claimant should state the monetary relief precisely.

A properly formulated request may identify:

1. Principal amount;
2. Currency;
3. Alternative Turkish-lira request;
4. Contractual or statutory interest basis;
5. Interest rate;
6. Interest commencement date;
7. Interest ending date;
8. Whether the interest is simple or compound;
9. Each category of damages;
10. Arbitration costs.

This is important because a tribunal must remain within the scope of the relief submitted to arbitration.

A tribunal that awards an amount, currency or category of relief never requested may create an excess-of-authority objection. Conversely, a tribunal that fails to determine an expressly submitted interest or damages request may face a supplementary-award application.

Under Article 436 of the Code of Civil Procedure, a domestic award must contain its legal reasoning and state the rights and obligations imposed on the parties clearly and definitively.

International Arbitration Law No. 4686 similarly requires the award to contain the legal grounds and, in a damages case, the amount awarded.

Foreign-Currency Obligations under Turkish Law

Article 99 of the Turkish Code of Obligations establishes the general framework for obligations denominated in a currency other than the currency of Türkiye.

Unless the contract requires payment in the foreign currency itself, the debtor may ordinarily perform the obligation in Turkish lira according to the exchange value at the date of payment.

Where the debtor fails to pay on the due date and the contract does not contain an exact foreign-currency payment requirement, the creditor may request either:

• Payment in the foreign currency; or
• Payment in Turkish lira according to the exchange value on the due date or the actual payment date.

This framework makes the wording of the contract critically important.

Exact Foreign-Currency Payment Clauses

The contract may state that the debt must be paid:

• “In USD only”;
• “Exactly in euros”;
• “In the contractual currency without conversion”;
• “Aynen ödeme”;
• “Effective payment in the specified currency.”

Where a valid exact-payment clause exists, the creditor may seek an award in the contractual foreign currency rather than accepting payment in Turkish lira.

The tribunal should examine:

• The precise wording;
• Mandatory currency legislation;
• The nature of the transaction;
• The parties’ status;
• Any restriction applicable at the date of contracting or performance.

The existence of a foreign-currency clause should not be assumed merely because the price was calculated by reference to a foreign currency. The contract may use foreign currency only as a value index while requiring payment in Turkish lira.

Foreign Currency as a Payment Currency or Calculation Unit

The tribunal should distinguish between:

Payment currency

The debtor must actually pay the stated currency.

Example:

The purchaser shall pay EUR 1,000,000.

Calculation currency

The amount is indexed to a foreign currency but paid in Turkish lira.

Example:

The Turkish-lira price shall be equivalent to EUR 1,000,000 calculated at the agreed exchange rate.

Accounting currency

The parties maintain accounts in a foreign currency, although settlement occurs in another currency.

Damages valuation currency

An expert may calculate loss in dollars or euros because the business operates internationally, even though the contract price was payable in Turkish lira.

Confusing these concepts may produce an award that grants relief inconsistent with the contract.

Due-Date Rate and Actual-Payment-Date Rate

Where Article 99 permits a Turkish-lira alternative, the exchange-rate date can materially affect recovery.

Potential dates include:

• Contract date;
• Invoice date;
• Delivery date;
• Due date;
• Date of default;
• Date of arbitration commencement;
• Date of award;
• Actual payment date.

Under Article 99, the creditor’s statutory options following non-payment focus on the due-date or actual-payment-date exchange value where the required conditions are satisfied.

The tribunal should avoid ordering payment according to an undefined “current exchange rate.” It should specify:

• The relevant date;
• The selected official or contractual source;
• Whether the buying, selling, effective buying or effective selling rate applies;
• What happens if the selected rate is not published on that date;
• Whether the original foreign-currency obligation remains the primary award.

Turkish law does not mean that every foreign-currency debt must automatically be converted according to one specific Central Bank quotation. The contractual wording and requested relief remain important.

Denomination Currency and Enforcement Currency

The currency stated in the award may differ from the currency ultimately used during enforcement.

For example, the award may order:

Payment of USD 500,000 together with interest.

If enforcement occurs against Turkish-lira bank accounts, the enforcement authority may need to apply the conversion mechanism recognised by Turkish enforcement law.

The tribunal should preserve the award currency clearly. An enforcing authority should not need to determine whether the tribunal intended:

• A fixed Turkish-lira amount;
• A continuing dollar obligation;
• A Turkish-lira equivalent as of the award date;
• A Turkish-lira equivalent as of actual payment.

An award that states only “the Turkish-lira equivalent of USD 500,000” without identifying the conversion date may generate avoidable disputes.

Default under Turkish Law

Interest does not necessarily begin automatically on the date of every contractual breach.

Article 117 of the Turkish Code of Obligations provides that a debtor of a due obligation generally enters default following notice from the creditor. Notice may not be required where:

• The due date was fixed by agreement;
• The due date is objectively determinable under the contract;
• The debtor declared that performance would not occur;
• Another statutory exception applies.

The tribunal should determine:

1. When the obligation became due;
2. Whether notice was required;
3. Whether valid notice was given;
4. Whether the contract fixed default automatically;
5. Whether a statutory commercial rule created automatic default.

Possible interest commencement dates include:

• Contractual due date;
• Date of formal notice;
• Date of invoice expiry;
• Date of termination;
• Date of mediation application;
• Date of request for arbitration;
• Date of award.

The claimant should not merely request interest “from the breach date” without explaining why that date legally created default.

Contractual Interest

The parties may agree on:

• Ordinary contractual interest;
• Default interest;
• Fixed annual interest;
• Floating-rate interest;
• A benchmark plus margin;
• Different rates for different currencies.

The agreement should define:

• Annual rate;
• Calculation basis;
• Day-count convention;
• Adjustment date;
• Reference rate;
• Margin;
• Simple or compound treatment;
• Consequences if the benchmark ceases to exist.

Where a floating rate is used, the award should contain an objectively determinable formula.

Example:

Three-month EURIBOR plus four percentage points per annum, reset quarterly, subject to a minimum rate of zero for the benchmark component.

An award should not require the parties to negotiate the applicable rate after the arbitration has ended.

Default-Interest Limitations under the Turkish Code of Obligations

Article 120 of the Turkish Code of Obligations regulates default interest.

Where no contractual default rate exists, the applicable rate is determined under the legislation in force when the interest obligation arises.

Under the general Code of Obligations framework, an agreed annual default-interest rate may not exceed the statutory limitation identified in Article 120. Where ordinary contractual interest was agreed but no separate default rate was stated, the contractual rate may continue to apply if it exceeds the otherwise applicable statutory default rate.

The interaction between Article 120 and commercial-law provisions must be examined carefully. The analysis may depend on:

• Whether the transaction is commercial for one or both parties;
• Whether the debtor is a merchant;
• The type of contract;
• Consumer-protection rules;
• Mandatory statutory limitations;
• Public-policy considerations.

A tribunal should avoid assuming that every high contractual rate between commercial companies is automatically valid or automatically invalid.

Commercial Interest under the Turkish Commercial Code

Article 8 of the Turkish Commercial Code recognises freedom to determine interest rates in commercial transactions.

It also places important restrictions on compound interest. Interest may be added to principal and made subject to further interest only in the situations permitted by law, including specified current-account and commercial-loan arrangements with periods of at least three months. Consumer protections remain reserved, and contractual provisions contrary to the statutory restrictions are ineffective.

The tribunal should therefore distinguish:

• Freedom to determine the numerical rate;
• Permission to charge compound interest;
• Consumer and small-business protections;
• Mandatory restrictions based on the transaction.

Commercial Supply and Service Payments

Article 1530 of the Turkish Commercial Code contains special rules concerning delayed payments for goods and services between commercial enterprises.

Depending on the contractual arrangement and statutory conditions, a debtor may become liable for interest automatically after the agreed payment date or applicable statutory period.

In a supply arbitration, the tribunal should consider whether Article 1530 applies before requiring a separate default notice.

The current annual rate applicable under the special commercial late-payment framework should be verified for the relevant year and accrual period. A rate published for one calendar year should not be applied automatically to the entire historical claim.

The Current Legal-Interest Rate in Türkiye

As of 14 July 2026, the operative legal-interest rate under the existing framework is 24% per annum, following the presidential decision effective from 1 June 2024.

The Constitutional Court annulled Article 1 of Law No. 3095 only in relation to obligations not arising from contract. The annulment was published on 1 December 2025 and is scheduled to take effect nine months later, on 1 September 2026. It did not annul the entire statutory interest regime or the rules applicable to all contractual claims.

As of 14 July 2026, a legislative proposal intended to address the resulting legal gap remained on the agenda of the Turkish Grand National Assembly and had not yet become law.

Accordingly, tribunals, parties and enforcing authorities should verify the current legislation again where:

• Interest continues beyond 1 September 2026;
• The claim arises outside contract;
• A supplementary award is issued after the new framework takes effect;
• Enforcement occurs after legislative amendment.

A tribunal should not freeze a changing statutory rate without deciding whether the award requires:

• The rate in force at the date interest began;
• Rates changing over successive periods;
• The rate in force at the award date;
• A dynamic statutory reference until payment.

Foreign-Currency Interest

Foreign-currency claims require a separate interest analysis.

Where the parties validly agreed on a foreign-currency interest rate, the tribunal should begin with the contractual provision, subject to mandatory law.

Where no contractual rate exists, Article 4/A of Law No. 3095 generally refers to the highest interest rate paid by state banks on one-year deposits in the relevant foreign currency.

The Central Bank of the Republic of Türkiye publishes monthly information concerning maximum rates actually applied by state banks to foreign-currency deposits.

The applicable rate may therefore differ according to:

• Currency;
• Bank data;
• Accrual period;
• Changes during the period;
• Evidence submitted.

A tribunal should not award a fixed rate for a USD or EUR claim merely because that rate appeared in another case.

The award may instead provide an objectively determinable formula, such as:

Simple interest at the highest annual rate actually applied by state banks to one-year deposits in US dollars under Article 4/A of Law No. 3095, calculated separately for each applicable period from the date of default until full payment.

The parties should submit reliable official data or expert calculations if the claim covers several years.

Avoiding Currency and Interest Mismatch

The interest rate should generally correspond to the currency of the awarded principal.

Examples of potentially inconsistent calculations include:

• Awarding a US-dollar principal with Turkish-lira statutory interest;
• Converting the loss into Turkish lira at the actual-payment rate while also awarding full foreign-currency devaluation damages;
• Awarding Turkish-lira inflation compensation on a euro-denominated principal without explanation;
• Using a dollar discount rate for a Turkish-lira cash-flow model.

The tribunal should identify the economic and legal basis for the selected combination.

A foreign-currency claim may already protect the creditor against depreciation of the Turkish lira. Additional currency-loss compensation should therefore be analysed carefully to prevent double recovery.

Simple and Compound Interest

Interest is not automatically compound.

Simple interest is calculated only on the principal amount.

Compound interest adds accrued interest to the principal, allowing further interest to accrue on the combined amount.

Compound interest may be permitted where:

• A valid contractual arrangement satisfies Turkish commercial-law conditions;
• A specific statute authorises it;
• The governing foreign law permits it and Turkish mandatory rules do not prevent enforcement;
• The commercial account structure falls within a recognised exception.

Article 8 of the Turkish Commercial Code restricts agreements for interest on interest outside the legally recognised circumstances.

The award should state expressly whether interest is:

• Simple;
• Compounded monthly;
• Compounded quarterly;
• Compounded annually;
• Capitalised on specified dates.

Silence should not be used to create compound interest through enforcement calculations.

Pre-Award and Post-Award Interest

Pre-award interest

Pre-award interest compensates the creditor for the period between default or loss and the award.

It may run from:

• Due date;
• Default notice;
• Date of loss;
• Date of payment made under an invalid contract;
• Date of arbitration commencement.

Post-award interest

Post-award interest applies after the tribunal issues the award and continues until payment.

The award should state whether:

• The same rate continues;
• A different post-award rate applies;
• Interest runs on principal only;
• Interest runs on awarded costs;
• Interest begins immediately or after a grace period.

A clear operative provision may state:

Respondent shall pay Claimant EUR 750,000, together with simple interest at 8% per annum from 15 March 2024 until the date of full payment.

Without the words “until full payment,” a debtor may argue that interest ended on the date of the award.

Interest on Arbitration Costs

A successful party may request interest on:

• Institutional fees;
• Arbitrator advances;
• Expert expenses;
• Recoverable legal fees.

The tribunal should determine:

• Whether the applicable law permits interest;
• When the cost loss was suffered;
• Whether the party actually paid the amount;
• The rate;
• The commencement date.

Interest on costs should be requested expressly rather than assumed.

Under the ISTAC Rules, the award must state the arbitration costs and their allocation. Recoverable costs may include institutional and arbitrator fees, appointed-expert and inspection costs, legal representation and other reasonable costs recognised by the tribunal.

Damages under Turkish Law

Turkish damages law generally aims to compensate proven loss rather than punish the breaching party.

A claimant ordinarily must establish:

1. Breach or another basis of liability;
2. Loss;
3. Causation;
4. The amount of recoverable loss;
5. Any required fault element.

Article 50 of the Turkish Code of Obligations places the burden of proving loss and fault on the injured party. Where the exact amount cannot be proven, the decision-maker may estimate the loss equitably by considering the ordinary course of events and the measures taken by the injured party.

Article 51 requires the amount and form of compensation to be determined by considering the circumstances and degree of fault. Article 52 permits reduction or elimination of compensation where the injured party consented to the harmful act, contributed to the loss or aggravated the debtor’s position.

Actual Loss

Actual loss may include:

• Amounts paid unnecessarily;
• Repair expenditure;
• Replacement purchase costs;
• Additional contractor costs;
• Storage expenses;
• Additional financing costs;
• Remediation costs;
• Expenses incurred because of delay.

The claimant should prove actual loss through:

• Invoices;
• Bank records;
• Accounting documents;
• Contracts;
• Expert reports;
• Payment evidence.

A budget estimate may not be enough where the claimant could produce actual cost records.

Lost Profit

Lost profit represents the economic benefit the claimant would probably have obtained if the breach had not occurred.

Examples include:

• Sales lost because a facility was delivered late;
• Profit lost after wrongful termination of a distribution agreement;
• Production revenue lost because defective equipment was unavailable;
• Rent lost because construction was not completed.

The claimant should establish a credible counterfactual scenario.

Relevant evidence may include:

• Historical performance;
• Existing orders;
• Capacity;
• Market demand;
• Customer contracts;
• Comparable periods;
• Operating costs;
• Competition;
• Mitigation.

Lost revenue is not the same as lost profit. Variable expenses that would have been incurred should generally be deducted.

Cost of Cure and Diminution in Value

Defective-performance claims may be measured through:

Cost of cure

The reasonable expense required to repair or replace defective performance.

Diminution in value

The difference between the value promised and the value actually delivered.

The tribunal should avoid awarding both in full where they compensate the same loss.

The appropriate measure may depend on:

• Whether repair is technically possible;
• Whether repair cost is proportionate;
• Whether the claimant intends to repair;
• Whether the defect affects usability, safety or market value;
• The contractual performance standard.

Wasted Expenditure

A claimant may seek expenses incurred in reliance on the contract where those expenses became useless because of the breach.

Examples include:

• Mobilisation;
• Training;
• Advertising;
• Project preparation;
• Custom equipment;
• Permit expenses.

The claimant should not recover both the entire expected profit and all expenditure that would have been incurred to earn that profit without an adjustment. Otherwise, the award may place the claimant in a better position than performance would have produced.

Diminution in Business or Share Value

M&A and shareholder arbitrations may involve claims that misconduct reduced the value of:

• A company;
• Shares;
• An investment;
• A business unit.

Valuation methods may include:

• Discounted cash flow;
• Comparable companies;
• Comparable transactions;
• Asset-based valuation;
• Transaction-price adjustments.

The tribunal should identify:

• Valuation date;
• Currency;
• Forecast period;
• Discount rate;
• Growth assumptions;
• Tax treatment;
• Control or minority adjustments;
• Information known at the valuation date.

A claimant should not combine full lost future profits with full diminution in enterprise value where both reflect the same future cash flows.

Excess Loss Caused by Default

Default interest and damages are not identical.

Article 122 of the Turkish Code of Obligations provides that where the creditor suffers loss exceeding default interest, the debtor may be required to compensate the excess unless the debtor proves absence of fault.

Where the additional loss can be determined in the pending proceeding, the decision-maker may award it upon request.

An excess-loss claim is not an automatic inflation adjustment.

The claimant should plead and prove:

• Loss exceeding the interest already recoverable;
• Causal connection with delayed payment;
• Debtor fault where relevant;
• Absence of double recovery.

Potential evidence may include:

• Borrowing costs;
• Lost investment return;
• Currency exposure;
• Financing agreements;
• Actual commercial consequences.

A general statement that inflation was high may not be sufficient by itself in every contractual case.

Mitigation

A claimant cannot remain passive while avoidable loss accumulates and then demand full compensation.

Reasonable mitigation may include:

• Purchasing replacement goods;
• Hiring another contractor;
• Reselling rejected goods;
• Repairing equipment;
• Finding a replacement distributor;
• Reducing unnecessary expenditure.

The respondent bears the practical burden of identifying unreasonable conduct and the loss that could have been avoided.

Mitigation does not require the claimant to:

• Take extraordinary commercial risks;
• Accept unlawful conditions;
• Finance an impossible substitute transaction;
• Damage its own business relationships unreasonably.

Contractual Penalties and Liquidated Damages

Turkish contracts frequently contain penalties for:

• Delay;
• Non-delivery;
• Confidentiality breach;
• Exclusivity breach;
• Early termination;
• Failure to meet performance standards.

A contractual penalty should be distinguished from:

• Default interest;
• Proven damages;
• Agreed price adjustment;
• Performance deduction;
• Security deposit.

The tribunal should determine:

• Whether the penalty clause is valid;
• Whether the triggering breach occurred;
• Whether notice or reservation was required;
• Whether the penalty can be reduced;
• Whether additional damages may be claimed;
• Whether the penalty duplicates another remedy.

Commercial status may affect the possibility of requesting judicial or arbitral reduction. The Turkish Commercial Code limits a merchant debtor’s ability to seek reduction of certain agreed penalties, although mandatory-law and exceptional public-policy considerations should still be examined according to the facts.

Limitation and Exclusion of Liability

The contract may limit:

• Total damages;
• Consequential loss;
• Lost profit;
• Indirect damage;
• Liability to the contract price;
• Liability to insurance proceeds.

The tribunal should analyse:

• The exact wording;
• Whether the excluded loss falls within the clause;
• Whether the limitation applies to gross fault or intentional conduct;
• Whether mandatory law restricts the exclusion;
• Whether the clause applies to penalties, indemnities and interest.

Labels such as “direct,” “indirect,” “consequential” and “special” damages may have different meanings under different legal systems. The tribunal should interpret them within the governing-law framework rather than relying automatically on common-law terminology.

Avoiding Double Recovery

The principle of compensation does not permit the claimant to recover the same economic loss twice.

Potential overlap includes:

• Foreign-currency principal and separate devaluation loss;
• Replacement cost and full diminution in value;
• Lost profit and enterprise-value loss;
• Contractual penalty and identical proven damages;
• Restitution and expectation damages;
• Interest and financing loss covering the same period.

The damages expert should prepare a reconciliation table identifying:

• Each category;
• Time period;
• Currency;
• Tax treatment;
• Overlap;
• Deductions;
• Mitigation.

The award should explain how duplication was avoided.

Damages Experts

Complex claims commonly require:

• Forensic accountants;
• Valuation experts;
• Delay experts;
• Industry economists;
• Foreign-exchange experts.

The expert should disclose:

• Instructions;
• Documents reviewed;
• Assumptions;
• Methodology;
• Calculations;
• Sensitivity analysis;
• Limitations.

The tribunal should separate legal questions from expert questions.

For example:

• The tribunal decides whether termination was unlawful;
• The expert calculates loss under the tribunal’s assumed finding.

Experts should provide alternative calculations where the result depends on disputed legal conclusions.

Discounting Future Damages

Future losses awarded as a lump sum may need to be discounted to present value.

The expert should explain:

• Currency of the cash flow;
• Nominal or real methodology;
• Inflation assumptions;
• Risk-free component;
• Business risk;
• Country risk;
• Whether breach risk is included;
• Valuation date.

The tribunal should avoid adding pre-award interest to a present-value calculation for periods already reflected in the discounting model.

Tax Treatment

An award may create tax consequences for either party.

The tribunal should be cautious about ordering payment “net of all taxes” unless the claimant has requested that relief and the governing contract or law supports it.

Relevant questions include:

• Whether withholding is legally required;
• Whether the payment represents income, damages or restitution;
• Whether the claimant receives a tax credit;
• Whether gross-up is contractually required;
• Whether taxes were already included in the damages model.

Tax claims often require expert evidence and should not be left to post-award negotiation.

Drafting the Operative Section

The operative section should be capable of enforcement without consulting extensive reasoning.

A clear structure may state:

1. Principal debt;
2. Damages;
3. Currency;
4. Interest;
5. Costs;
6. Dismissed claims.

An illustrative formulation is:

Respondent shall pay Claimant USD 1,250,000 as principal.

Respondent shall pay simple interest on USD 1,250,000 at the contractual rate of 7.5% per annum from 1 February 2025 until full payment.

Respondent shall reimburse Claimant TRY 2,000,000 in arbitration costs, together with legal interest from the date of this Award until full payment.

Where a Turkish-lira alternative is granted, the award should identify the rate date and source precisely.

The tribunal should also state whether:

• Payments already made are deducted;
• Partial payment is first allocated to interest or principal;
• Interest runs on costs;
• Amounts are exclusive or inclusive of tax;
• Claims not granted are dismissed.

Correction, Interpretation and Supplementary Awards

Arithmetic or drafting errors do not always require annulment proceedings.

Article 437 of the Code of Civil Procedure permits:

• Correction of computational, typographical and similar errors;
• Interpretation of an unclear part of the award;
• A supplementary award concerning a claim presented during the arbitration but omitted from the award.

The ISTAC Rules similarly provide a procedure for correction, interpretation and completion, generally requiring applications within 30 days of notification of the award.

A supplementary award may be appropriate where the tribunal decided the principal claim but unintentionally omitted:

• The interest request;
• A separate damages category;
• A costs request;
• A counterclaim.

The mechanism should not be used to submit a new claim after the arbitration has ended.

Annulment Risks

A Turkey-seated award is not ordinarily subject to a full appeal on the merits.

Under Article 439 of the Code of Civil Procedure, annulment is limited to specified grounds, including:

• Invalid arbitration agreement;
• Improper tribunal constitution;
• Excess of authority;
• Failure to decide the entire submitted claim;
• Material procedural violation;
• Violation of equality or the right to be heard;
• Non-arbitrability;
• Public policy.

International Arbitration Law No. 4686 contains comparable limited grounds.

An ordinary disagreement over the tribunal’s selection of:

• A discount rate;
• An expert;
• A damages methodology;
• The weight of evidence;
• A contractual-interest interpretation

should not automatically become an annulment appeal.

Greater risk may arise where the tribunal:

• Awards a currency never requested;
• Grants damages beyond the submitted claim;
• Omits an entire pleaded request;
• Orders unlawful compound interest;
• Enforces a monetary clause contrary to fundamental public policy;
• Uses evidence on interest or damages that one party had no opportunity to address.

Recognition and Enforcement of Foreign Awards

A foreign or non-domestic award may be recognised and enforced under the New York Convention or Turkish private international law.

The New York Convention permits refusal only on limited grounds, including invalidity of the arbitration agreement, procedural unfairness, excess of authority, non-arbitrability and public policy.

A foreign award will not ordinarily be refused merely because the Turkish court would have calculated interest or damages differently.

Enforcement difficulty may nevertheless arise where the award:

• Does not identify the currency;
• Uses an indeterminate interest formula;
• Orders an unlawful form of compound interest;
• Grants punitive relief conflicting fundamentally with Turkish public policy;
• Leaves essential calculations to future agreement;
• Contains contradictory principal and interest provisions.

Clear award drafting is therefore part of enforcement planning.

Practical Checklist

Before submitting or deciding a monetary claim in Turkish arbitration, the following matters should be addressed:

1. What law governs the monetary claim?
2. What is the contractual payment currency?
3. Is exact foreign-currency payment required?
4. Is Turkish-lira payment permitted?
5. Which exchange-rate date applies?
6. Which exchange-rate source applies?
7. When did the obligation become due?
8. Was a default notice required?
9. When did default occur?
10. Is there a contractual interest rate?
11. Does a statutory rate apply?
12. Is the principal in Turkish lira or foreign currency?
13. Is the requested interest simple or compound?
14. Is compound interest legally permitted?
15. Does interest continue until payment?
16. Is interest requested on damages and costs?
17. Has each damages category been proven separately?
18. Has mitigation been considered?
19. Has double recovery been eliminated?
20. Is the operative section sufficiently clear for enforcement?

Frequently Asked Questions

Can a Turkish arbitral award be issued in foreign currency?

Yes. Where the underlying obligation and requested relief support payment in foreign currency, the tribunal may award the relevant foreign-currency amount.

Can the debtor pay a foreign-currency debt in Turkish lira?

Under Article 99 of the Turkish Code of Obligations, Turkish-lira payment may generally be possible unless exact payment in the foreign currency was agreed, subject to the applicable statutory conditions.

Which exchange rate applies if the debtor failed to pay?

Where the statutory conditions are satisfied and no exact-payment clause exists, the creditor may request the Turkish-lira equivalent according to the due-date or actual-payment-date value.

Does the Central Bank buying rate always apply?

No. Article 99 refers to exchange value but does not create one universal Central Bank rate for every contractual situation. The contract, claim and award should identify the relevant rate.

When does default interest begin?

It generally begins when the debtor enters default. This may occur on the fixed due date, following a valid notice or under another statutory exception.

What is the current legal-interest rate in Türkiye?

As of 14 July 2026, the operative rate is 24% under the current framework. The Constitutional Court’s annulment concerning non-contractual obligations is scheduled to take effect on 1 September 2026, and the legislative position should be verified again after that date.

Does the 24% rate automatically apply to USD or EUR debts?

No. Foreign-currency claims may be governed by a contractual rate or the statutory foreign-currency interest mechanism.

How is statutory foreign-currency interest determined?

In the absence of a contractual rate, Article 4/A of Law No. 3095 generally uses the highest rate applied by state banks to one-year deposits in the relevant foreign currency. The applicable rate should be established for the relevant period.

Can compound interest be awarded?

Only where a valid contractual or statutory basis permits it. Turkish commercial law restricts agreements for interest on interest outside recognised cases.

Does interest continue automatically after the award?

The award should state expressly that interest continues until full payment. Silence may create enforcement disputes.

Can a claimant recover both interest and damages caused by delayed payment?

Potentially. Article 122 permits recovery of proven loss exceeding default interest under the applicable conditions. The additional loss is not automatic and must be pleaded and proven.

Is inflation alone sufficient to prove excess loss?

Not automatically in every contractual case. The claimant should establish the specific loss exceeding the interest already recoverable.

Can lost profits be awarded?

Yes, where breach, causation and the probable amount of lost profit are established through sufficiently reliable evidence.

Must damages be proven exactly?

The claimant should prove the loss as far as reasonably possible. Where exact proof is impossible, Article 50 permits an equitable estimation based on the ordinary course of events and the measures taken by the injured party.

Can the tribunal reduce damages because the claimant contributed to the loss?

Yes. Contributory conduct, failure to mitigate or aggravation of the debtor’s position may support reduction under Article 52.

Can a tribunal award more than the claimant requested?

The tribunal should remain within the scope of submitted relief. Granting relief beyond the claim may create an excess-of-authority objection.

What happens if the tribunal forgets to decide the interest claim?

The party may seek a supplementary award within the applicable statutory or institutional period.

Can an award be annulled because the court disagrees with the damages calculation?

Ordinary disagreement with the merits is generally insufficient. Annulment is limited to statutory grounds such as excess of authority, procedural unfairness, non-arbitrability and public policy.

Conclusion

Interest, foreign currency and damages in Turkish arbitration awards require a coordinated legal, financial and procedural analysis.

The tribunal must first identify the nature of the underlying monetary obligation. A foreign currency may function as the payment currency, a calculation unit, an accounting currency or a damages valuation currency. These concepts should not be treated as interchangeable.

Article 99 of the Turkish Code of Obligations provides the principal framework for foreign-currency debts. Unless exact payment in the foreign currency was agreed, Turkish-lira payment may be possible. Following non-payment, the creditor may have options based on the due-date or actual-payment-date exchange value.

The interest analysis begins with default.

The tribunal should determine:

• The due date;
• Whether notice was required;
• The date of default;
• The contractual interest provision;
• The applicable statutory regime;
• The currency of the principal.

Turkish-lira and foreign-currency claims should not be subjected automatically to the same interest rate.

As of 14 July 2026, the general legal-interest rate remains 24% under the current framework. However, the Constitutional Court’s annulment concerning non-contractual obligations is scheduled to take effect on 1 September 2026, and legislative proposals remained pending as of the date of this article. The current legal position must therefore be verified when an award is issued or enforced.

Foreign-currency statutory interest may depend on state-bank deposit rates for the relevant currency and period. A tribunal should not insert a fixed percentage without evidence or a clear legal basis.

Compound interest requires particular caution. Freedom to agree commercial interest rates does not eliminate statutory restrictions on charging interest upon interest.

Damages must also be separated into clear categories.

The claimant should prove:

• Actual loss;
• Lost profit;
• Causation;
• Mitigation;
• Currency;
• Valuation date;
• Absence of duplication.

Article 50 permits reasonable estimation where exact proof is impossible, but it does not remove the requirement for a credible evidentiary basis.

Excess loss under Article 122 must be pleaded separately. It is not an automatic inflation supplement to every default-interest award.

The operative section should state:

• Principal;
• Currency;
• Interest type;
• Rate;
• Commencement date;
• End date;
• Costs;
• Any alternative conversion mechanism.

Clear drafting protects both parties. It allows the debtor to understand precisely what must be paid and allows the creditor to enforce the award without reopening the merits.

For Turkish and international businesses, specialised arbitration counsel and financial experts can assist with foreign-currency claims, interest calculations, damages modelling, expert evidence, award drafting, correction applications and enforcement strategy.