- in South America
- within Finance and Banking and Technology topic(s)
- with readers working within the Banking & Credit industries
Turkish Constitutional Court has rendered a landmark judgment that will lead to fundamental changes in the economic legislation. The Court annulled Articles 1, 2, and Additional Article 5 of Law No. 1567 on the Protection of the Value of Turkish Currency.
Annulled Provision
"Article 1
The President shall be authorized to make decisions for the regulation and restriction of the exportation and importation of currency, coins, shares, bonds, precious metals, precious stones, or any goods containing them, as well as all kinds of commercial instruments and means of payment; and to take measures for the protection of the value of the Turkish currency."
Under Article 1 of Law No. 1567, the President had been granted broad powers to make decisions regarding the exchange regime, precious metals, and the protection of the Turkish currency's value.
With this annulment, the Court also annuled Article 2, which regulated the enforcement of such decisions; and Additional Article 5, which prescribed sanctions for violations of these provisions.
The annulment of Article 1 will take effect nine months after the publication of the Court's judgment in the Official Gazette, i.e. on 15 July 2026. However, the annulment of the other articles have entered into force immediately.
Reasoning of the Decision
The Court held that these matters concern fundamental rights and freedoms, which can only be restricted by law, not by executive decision. It emphasized that the powers granted to the President were not subject to any explicit legal limitations and therefore found the provisions unconstitutional.
Legal Consequences of the Decision
The annulled provisions formed the legal basis for numerous regulations concerning banking, foreign exchange, currency transactions and capital movements. As a result, a substantial portion of secondary legislation such as decrees, communiqués, and circulars based on this law has lost its legal basis.
If a new legal framework is not enacted within nine months, these regulations will also become legally invalid. Some notable examples include:
- Decree No. 32 on the Protection of the Value of Turkish
Currency (1989):
A cornerstone of Turkey's transition to an open market economy. Despite numerous amendments, it remains in force and governs essential issues such as foreign exchange operations, the exchange regime, trade in precious metals and stones, banking and credit transactions, and restrictions on foreign currency–denominated loans. Since it was based on Article 1 of Law No. 1567, it now requires a new statutory basis within nine months. - Turkish Central Bank's Capital Movements Circular: Regulating critical aspects such as the restriction of credit transactions by non-bank institutions and the conditions for foreign currency loans, this circular also depends on Decree No. 32 and is therefore affected by the annulment.
- Restrictions on Contracts in Foreign Currency:The prohibition on concluding certain contracts in foreign currency—an issue that has frequently dominated the public agenda—was introduced by a communiqué based on Decree No. 32. In the absence of a new legislative basis, these restrictions will lack legal validity.
These examples represent only a portion of the extensive regulatory framework influenced by the Court's annulment. The decision will have far-reaching implications across various sectors of Turkish law.
Discussion: Was the Law Truly Annulled?
A significant point of contention remains: the Court annulled the version of Article 1 of Law No. 1567 that was in force prior to the amendment of 20 July 2025. This is because the case had been brought before the Court before that date.
However, Law No. 755, enacted on 20 July 2025, introduced minor amendments to the same article - changes that did not alter the substantive reasons for annulment.
Given that the Court's ruling concerns the previous version of the article, while the provision was re-enacted with limited modifications shortly thereafter, there is a plausible argument that the current version of the article remains in force despite the Court's judgment. This issue is likely to be a subject of ongoing debate among legal scholars in the near future.
CONCLUSION
The Constitutional Court's annulment of the relevant provisions of Law No. 1567 marks a turning point in Turkish financial and administrative law. The decision necessitates the enactment of new legislation to fill the resulting legal vacuum, particularly in areas such as banking, foreign exchange contracts, currency transactions, and capital movements. The coming months will be crucial in determining how Turkey's legal and economic framework adapts to this constitutional development.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
