Significant court decisions in the last trimester concerning litigation

1.1 The Constitutional Court annuls the provision extending the scope of exceptions to the principle that court proceedings be open to the public.1

With its decision numbered 2020/73, and dated October 26, 2023, the Constitutional Court of Türkiye ("Constitutional Court") decided to revoke a recent amendment of Article 28 of the Code on Civil Procedures ("CCP") extending the scope of exceptions to the principle that court proceedings be open to the public on the ground that the amendment introduces a specific limitation on the right to a fair trial that has not been envisaged in the Turkish Constitution ("Constitution"). The amendment of Article 28 of CCP provided that the court may, ex-officio or upon request of the person concerned, decide to conduct hearings closed to the public only in cases where public morality or public security, or the superior interests, worth of protection, of the persons related to the proceedings renders it strictly necessary.

In tis decision, the Constitutional Court stated that the principle that court proceedings be open to the public ("Principle") is conceived as a fundamental element of the right to a fair trial under Article 36 of the Constitution. This Principle aims to ensure the transparency of judicial processes, and prevent arbitrariness in the judiciary by enabling the public to review judicial proceedings. It also serves as an instrument to secure the public's trust in the notion of justice.

The Constitutional Court stated that since the provision subject to its review constitutes a further restriction on the principle, it must be compliant with regulation on the limitation of fundamental rights under Article 13 of the Constitution. Therefore, the provision must be clear, accessible, and foreseeable, as per Article 2 of the Constitution.

The Constitutional Court determined that the provision limits the scope of the Principle by stating that in case that the relevant parties' interests are endangered, the court proceedings can be conducted closed to the public. The Constitutional Court indicated that the statement of "relevant parties" means any third party whose interests may be harmed as a result of any information or document to be disclosed during court proceedings. With this amendment, the right to request that the court proceedings be conducted closed to the public is not only granted to the parties to the lawsuit, but also extended to any third party who may be affected by the lawsuit.

On the other hand, the Constitutional Court found that the amendment refers to "a superior interest worth of protection", which furnishes sufficient certainty and foreseeability. Therefore, the Constitutional Court determined that the amendment does not violate the Constitution in this respect.

However, establishing that fundamental rights and freedoms can only be restricted by the relevant clauses of the Constitution, the Constitutional Court emphasized that if the Constitution itself sets specific reasons for the restriction of a constitutional right, no further limitation can be imposed on that right anymore. Furthermore, the Constitutional Court stated that the duties attributed to the State by the Constitution can also not be used as reasons to implement a new restriction on a constitutional right that is subject to specific restrictions.

In light of the above, the Constitutional Court annulled the amendment by indicating that Article 141 of the Constitution already provides for exceptions for when the court proceedings can be closed to the public, and it is not possible to introduce any further restriction.

1.2 The Constitutional Court ruled that the requirement for application to mediation prior to initiation of lawsuits before the consumer courts is constitutional.2

In its decision numbered 2020/73 and dated October 26, 2023, the Constitutional Court rejected the request for the annulment of Article 73/A that requires the launch of mediation proceedings before the filing of lawsuits at the consumer courts on the grounds that the provision satisfies all conditions for the limitation of a constitutional right.

In their application for the abstract norm review, the applicants argued that the said provision places an unproportional limitation on the consumers' right to access to the court by forcing them to settle with the counter-party under unequal conditions, it lengthens the judicial process for the consumers, and it provides for a settlement process where parties are not equal. Therefore, the provision is claimed to be in violation of constitutional principles of equality, protection of consumers, and the constitutional rights articulated above.

The Constitutional Court stated that setting the launching of a mediation proceeding as a pre-requisite for the filing of a lawsuit restricts consumers' right to access to the court as regulated under Article 36 of the Constitution. However, the Constitutional Court determined that the provision also clearly establishes the scope of and exceptions to the instances where application for mediation proceedings is required. Moreover, the Constitutional Court emphasized that the function of the provision is in compliance with the objectives of the mediation institution.

Furthermore, the Constitutional Court stated that the requirement to apply to mediation proceedings before filing a lawsuit with the consumer courts enable parties to settle their dispute in an expedited manner. The Constitutional Court also indicated that the provision is important in that it allows the parties to resolve their conflict through peaceful means, and thus, helps the preservation of public order.

The Constitutional Court found that the limitation on the right to access to the court introduced by the said provision is appropriate to achieve the objectives of enabling consumer disputes to be resolved in a faster and simpler way, and reducing the courts' workload. Moreover, the provision provides parties with a platform for settling their dispute under the guidance of a professional, independent and impartial mediator under equal circumstances. Therefore, the said provision is necessary to attain the above-stated objectives.

Considering that the mediation proceedings will not last more than four weeks, and prescriptive periods and statute of limitations do not run, the Constitutional Court found that the requirement for the initiation of a mediation proceeding before filing a lawsuit at consumer courts neither unnecessarily prolongs the judicial process nor causes any loss of rights to consumers. Also, the Constitutional Court argued that the provision introduces several protective regulations in favor of consumers including the non-liability of consumers for court fees for not attending the mediation process. Finally, the provision provides a flexibility to some extent by enumerating exceptional situations under which there will be no requirement to launch mediation proceedings.

In light of above reasoning, the Constitutional Court concluded that the provision bringing the requirement to apply to a mediator prior to filing a lawsuit at consumer courts preserves the balance between people and public interest, while the limitation on the right to access to the court does not place an unproportional burden on the people, and is in line with the proportionality condition sought under Article 13 of the Constitution. Therefore, the Constitutional Court ruled that the provision is constitutional, and rejected the application.

1.3 The Constitutional Court has annulled Article 326/2 of the Code on Civil Procedures for compensation claims due to confiscation without expropriation (kamulaştırmasız el atma).3

The Article 326/2 of CCP regulated the distribution of court fees in cases where the court partially accepts the lawsuit. With its decision numbered 2023/101 E., 2023/207 K. and dated November 30, 2023, the Constitutional Court has annulled this Article for lawsuits related to compensation claims due to confiscation without expropriation. The Constitutional Court stated that the annulment is based on the violation of the guarantee to pay the real value of the expropriated good as established under Article 46.

In its application for the concrete norm review, the Küçükçekmece 5th Civil Court stated that in case the court partially accepts the compensation claims due to confiscation without expropriation, the plaintiff will be held partially liable for the court fees. The Court argued that this partial liability contradicts with the right to property, the State's duty to protect people's right to property, and the rule of law. The applicant court also referred to the Constitutional Court's decisions in the individual applications which conclude that imposing a part of the court fees on the plaintiffs in compensation claims related to confiscation without expropriation violates the plaintiffs' constitutional rights.

The Constitutional Court found that the partial imposition of court fees on the plaintiff in the above-stated cases means that the plaintiff will not be able to obtain the whole value awarded by the court as compensation. The Constitutional Court determined that this constitutes a restriction on the right to property.

According to the Constitutional Court, the said provision must not be in conflict with the wording of the Constitution, including foremost the additional guarantees envisaged in different clauses of the Constitution. Article 46/1 of the Constitution provides that the State or other public legal persons may expropriate private properties on the condition that the State (or others) pays the full real value of the relevant property. Therefore, the Constitutional Court argued that the State may only claim ownership over private properties implementing the procedure set in Article 46, and paying the real value of the properties.

The Constitutional Court pointed out that confiscation without expropriation is an unlawful act as it does not comply with the expropriation procedure contained in the Constitution. The Constitutional Court further stated that even if a court partially accepts the plaintiff's claim in a confiscation without expropriation lawsuit, the plaintiff (i.e the owner of the expropriated immovable) still must enjoy the additional securities included in Article 46, and must be paid the real value of its property. Therefore, the Constitutional Court concluded that if the plaintiff is held liable for court fees, and thus, an additional financial burden is imposed upon it, it would not be compensated with the real value of its property. In light of this, the Constitutional Court annulled Article 326/2 of CCP for compensation claims due to confiscation without expropriation.

1.4 The Constitutional Court annuls the provision establishing the minimum monetary limits for appeal before administrative courts.4

With its decision numbered 2023/81 and dated October 26, 2023, the Constitutional Court revoked Article 45/1.2 and Additional Article 1 of the Code on Administrative Procedures ("CAP") addressing the minimum monetary limits required to appeal decisions of administrative and tax courts on the grounds that these provisions did not contain sufficient clarity as to the date by which monetary limits for appeal will be considered. The decision was published in the Official Gazette on December 21, 2023.

The provisions subject to annulment regulate the monetary limit for filing an appeal against the decisions of administrative and tax courts. Accordingly; such provision stated that "the decisions of the administrative and tax courts on tax cases, full remedy actions and nullity actions against administrative acts, the subject matter of which does not exceed five thousand Turkish Liras, shall be final and no appeal may be filed against them.

Istanbul 13th Administrative Court and 2nd Tax Chamber of Samsun Regional Administrative Court filed their objection to the Constitutional Court stating that the said provisions establish monetary limits for appeal, that these limits are updated per the revaluation rates on an annual basis, that this change in monetary limits may cause a loss of right to appeal as the monetary limits for appeal may be different on the dates of filing of the lawsuit and the decision. The objection also claims that the said provisions do not provide any clarity as to whether the date of lawsuit or the issuing of decision is to be taken as a basis to determine the monetary limits for appeal. For all these reasons, the above provisions are argued to violate the constitutional requirements for laws to be clear and foreseeable, and thus, needs to be annulled.

The Constitutional Court found that the right to request a review of any decision by a court of higher degree is considered under Article 36 of the Constitution. The said provisions introduce a limitation on the constitutional right to appeal a court decision. According to Article 13 of the Constitution, any limitation on fundamental rights and freedoms needs to be instituted through a law that is clear, accessible and foreseeable. The Constitutional Court also referred to its very recent ruling annulling a similar provision on the minimum monetary limits for appeal to the Council of State, and emphasized that it found this provision unconstitutional.

The Constitutional Court stated that the provisions contained in CAP subject to its review do not regulate which date will be taken into account while determining the monetary limits for appeal. Furthermore, any other provision under Turkish law does not provide any explanation as to this issue. Since the monetary limits for appeal are updated on a yearly basis, the said provisions cannot be uttered to be clear, and certain. Furthermore, the said provisions are incompatible with the right of access to the court and the right to request a review of the judgment. Therefore, the Constitutional Court concluded that Article 45/1.2 and Additional Article 1 of CAP are unconstitutional, and annulled them.

Despite the objection request enumerating the violation of equality principle among its reasons for annulment, the Constitutional Court decided that it is unnecessary to make further examination on the above provisions since they are already addressed within the scope of Articles 13 and 36 of the Constitution. The Decision will enter into force nine months after the date that the Decision is published in the Official Gazette (21 December 2023), in other words, on 21 September 2024.

1.5 The Constitutional Court annuls the provision on the inflation adjustment on the ground that such regulation means retroactive application of laws.5

In its decision numbered 2023/105 E., 2023/208 K. and dated November 30, 2023, the Constitutional Court revoked the provision precluding an inflation adjustment for the year 2021 ("Decision"). The Decision has been published on the Official Gazette numbered 32431 and dated January 16, 2024. Since the Decision does not specify an effective date for the annulment to take effect, it is presumed to be effective by the date of its publication on the Official Gazette as per Article 153 of the Constitution.

The Constitutional Court has addressed the compatibility of the said provision with the constitutional rights after an objection filed by a first instance court which had been dealing with a taxpayer's request for the refund of the overpaid taxes. The Constitutional Court stated that the inflation adjustment is instituted to eliminate the artificial increase realized in the tax bases due to inflation, and the negative impact associated therewith, and to ascertain the real taxable amount. Article 298 of Tax Procedural Law No. 213 ("TPL") regulates how to apply the inflation adjustment to the non-monetary assets indicated in financial statements. Article 298 requires the satisfaction of two cumulative conditions for the inflation adjustment to be applied. These conditions are (i) an increase by more than 100% in the Domestic Producer Price Index (D-IPP) over the last three accounting periods including the current period, and (ii) an increase by more than 10% in D-IPP over the current accounting period. However, the Article 33/1 of the TPL, which was added afterwards and was effective as of 20 January 2022, provides that the financial statements will not be subject to inflation adjustment in the 2021 and 2022 accounting periods, including the provisional tax periods, and the provisional tax periods of the 2023 accounting period, regardless of whether the conditions for inflation adjustment are met.

After examining the relevant data, the Constitutional Court concluded that both of the above-stated conditions for inflation adjustment have been realized. Furthermore, the Constitutional Court found that by the time the provision preventing the application of inflation adjustment entered into force, the accounting period for both corporate income tax and income tax had ended. In other words, the Constitutional Court stated that the entry into force of the said provision meant retroactive application of laws as it constituted a change into the inflation adjustment regulations that had an effect on the determination of tax bases after the cause of taxation occurred. Therefore, the Constitutional Court pointed out, the provision regarding the inflation adjustment application brought about an unconstitutional restriction on the right to property as it was in breach of both the legality of laws and legality of taxes.

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Footnotes

1. You may access the decision here.

2. You may access the decision here.

3. You may access the decision here.

4. You may access the decision here.

5. You may access the decision here.

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