One of the most common claims encountered in construction disputes is colleteral damages claims filed by subcontractors against employers. Examples of these claims include interest on loans taken out by the subcontractor due to the employer's failure to fulfill contractual payment obligations, late payment penalties and fines arising from unpaid social security and tax debts, wage claims, interests and court costs resulting from unpaid salaries of the employees.
Under normal circumstances, the interest accrued by Code of Legal Interest and Default Interest numbered 3095, or the default interest specified in the contract if applicable, is intended to compensate for losses incurred due to non-fulfillment of contractual obligations. However, in commercial life and in situations where inflation increases and economic conditions change, it is common to find that default interest does not cover the creditor's losses.
Colleteral damages, according to Article 122 of the Turkish Code of Obligations, are the extra damages suffered by a creditor due to a debtor's late payment of a monetary debt, which cannot be covered by default interest. For colleteral damages to be considered, there must be a monetary claim, the debtor must be in default, the debtor must be at fault for the default, and there must be a causal link between the damage and the default. Additionally, if this damage can be determined in court, the judge who renders the final decision will also rule on its amount. In this case, colleteral damages are independent of the underlying relationship between the parties.1
However, unlike the clause regarding colleteral damages, the arbitration clause is directly linked to the underlying relationship. This is because when an arbitration agreement is made between the parties, the dispute to be arbitrated must be specific, and the parties must know from which legal transaction the dispute arises. Therefore, since the principle of certainty is fundamental in arbitration, it will not be possible to make an arbitration agreement without a specific dispute. In this case, an arbitration agreement made before the dispute (colleteral damages claim) arises, stating that disputes arising from the contract will be resolved through arbitration, will not cover colleteral damages. In this situation, the general courts will have jurisdiction to resolve the dispute. In a case involving a claim for colleteral damages, arbitration is only possible if the parties mutually agree after the dispute has arisen.2
Consequently, even if the contract between the subcontractor and the employer includes an arbitration clause, or if an arbitration agreement exists between the parties prior to the dispute, the arbitration agreement will not cover claims for colleteral damages. General courts will have jurisdiction over disputes concerning colleteral damages.
Footnotes
1 General Assembly of Supreme Court, 05.2.2014, 2013/19-201 M.,2014/58 D.
2 3rd Civil Chamber of Supreme Court, 2024/1071 M., 2025/1519 D.,11.03.2025
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