Currency and Interest Issues in Debt Claims Against Turkish Companies

A foreign creditor can generally claim and pursue enforcement against a Turkish debtor for a debt denominated in a foreign currency, but the timing used to convert the debt into Turkish lira for enforcement purposes, and the interest rate that applies to the arrears, both need to be addressed carefully, since mishandling either can meaningfully reduce the amount actually recovered.

Cross-border commercial debts are frequently denominated in a foreign currency such as US dollars or euros, but Turkish enforcement mechanics ultimately often operate in Turkish lira at some stage of the process, whether for calculating the enforcement fee base, for attachment of Turkish lira-denominated assets, or for other procedural purposes. Understanding when and how conversion occurs, and how interest accrues in the meantime, is essential to protecting the real value of the claim.

The Turkish Code of Obligations No. 6098 confirms that parties may denominate and generally claim payment of a foreign currency debt as such, subject to specific statutory provisions governing debtor payment options and conversion mechanics in certain contexts. The Enforcement and Bankruptcy Law No. 2004 governs how foreign currency claims are handled within enforcement proceedings, including the point at which conversion to Turkish lira may become relevant for procedural purposes.

In practice, Turkish enforcement offices and courts generally allow a claim to be filed and enforced in its original foreign currency, converting to Turkish lira, where necessary, at the exchange rate applicable on a legally significant date, commonly the payment date or another statutorily defined reference date rather than an earlier, potentially more favourable, date chosen by the creditor. Default interest is calculated according to rates applicable to the relevant currency and type of claim.

There is practical debate over which exchange rate date most fairly reflects the creditor's actual loss, particularly during periods of significant currency volatility, since a gap between the date the debt fell due and the date of actual conversion or payment can materially affect the real recovery. Practitioners also discuss the interaction between contractual interest rate clauses and statutory default interest rates applicable to foreign currency obligations.

A creditor pursuing a foreign currency claim should confirm the currency is clearly specified in the underlying contract or invoice, should track the relevant exchange rate reference points applicable to its claim, and should consider whether a contractual interest rate clause exists or whether statutory default interest rates will apply instead.

Currency conversion issues typically arise at defined procedural moments, such as the calculation of the enforcement proceeding's fee base or the moment of actual payment or attachment, rather than at a single fixed point in the underlying substantive claim. Creditors should monitor these procedural stages closely, since delay in pursuing enforcement can itself affect the exchange rate ultimately applied.

Currency and interest calculation questions typically arise within the enforcement office handling the file or before the court hearing the underlying claim, particularly where the debtor disputes the amount calculated in Turkish lira or the interest applied.

Essential evidence includes the contract or invoice specifying the currency of the debt, any contractual interest rate clause, and records of the applicable exchange rates at the relevant reference dates used in the enforcement or litigation process.

A common mistake is assuming that a foreign currency debt is automatically frozen at the exchange rate in effect when the debt first fell due, when in fact enforcement mechanics can apply a different, later reference date. Creditors also sometimes overlook including an express contractual interest rate clause, leaving the applicable rate to be determined instead by statutory default provisions that may be less favourable.

Can a debt in US dollars or euros be enforced against a Turkish company without converting it first? Yes, foreign currency claims can generally be filed and enforced as such, with conversion to Turkish lira occurring at defined procedural stages where necessary.

Which exchange rate applies when conversion is needed? This depends on the specific procedural context and applicable rules; it is often tied to a legally significant date such as the payment date rather than the date the debt first fell due.

Does interest continue to accrue on a foreign currency debt during enforcement? Yes, default interest generally continues to accrue, calculated according to the rate applicable to the currency and type of claim involved.

Should contracts with Turkish companies specify an interest rate and currency clearly? Yes, clear currency and interest provisions in the original contract significantly reduce later uncertainty and disputes during enforcement.

We review the currency and interest provisions of the underlying contract before pursuing a claim against a Turkish company, and track the applicable exchange rate and interest calculations throughout enforcement, since these technical details can materially affect how much of the original claim is actually recovered.