Press Release No: Plenary Assembly 17/18
15.11.2018

PRESS RELEASE CONCERNING THE DECISION ANNULLING THE PHRASE IN ARTICLE 278 OF THE ENFORCEMENT AND BANKRUPTCY LAW

The Constitutional Court, at its meeting dated 11 July 2018, annulled the phrase “… through ancestry or …” in Article 278 § 3 (1) of the Enforcement and Bankruptcy Law no. 2004 dated 9 June 1932, finding it in breach of the Constitution, and it dismissed the request for annulment in so far as it related to Subparagraph (2) therein for not being in breach of the Constitution.

A. Phrase in Article 278 § 3 (1) of the Law

Contested Provision

The contested provision provides that the properties transferred by the debtor (in return for a payment) to his relatives up to the third degree (including this degree) shall be accepted as donation.

Grounds for the Request for Annulment

It was argued that the regulation restricting the right to property for the purpose of preventing any damage to the creditor did not serve the public interest, that it impaired the essence of the right to property and that it did not comply with the principle of proportionality, which was in breach of the Constitution.

The Court’s Assessment

According to the contested provision, the debtor shall also subsequently be liable for his transactions on his property, which were carried out during the period when his authority to dispose of the property was not restricted in legal terms, and the third party to whom the property was transferred shall be liable to bear the compulsory enforcement procedures. Therefore, the contested provision is in breach of the debtor’s and the third party’s right to property.

The interference with the right to property must not only pursue a legitimate aim, but it must also be proportionate and not impose an excessive and disproportionate burden on the owner of the property.

The contested provision, which provides that the properties transferred by the debtor (in return for a payment) to his relatives up to the third degree (including this degree) shall definitely be accepted as donation, does not provide the parties with the opportunity to submit their claims and defence regarding these issues, as well as to submit evidence, information and documents to prove thereof. In this sense, the regulation that disturbs, to the detriment of the property owner, the reasonable balance to be struck between the interference with the right to property and the aim sought to be achieved by the interference cannot be regarded as proportionate.
The contested provision leads to the restriction of the right to property and the right to legal remedies disproportionately, by disturbing the balance between public and personal interests.

For the reasons explained above, the phrase “… through ancestry or …” was annulled for being in breach of Articles 13, 35 and 36 of the Constitution, and it was decided that the annulment decision would enter into force nine months after being published in the Official Gazette.

B. Article 278 § 3 (2) of the Law

Contested Provision

The contested provision provides that the contracts where the debtor accepted a price much lower than the value of the property he transferred shall be regarded as donation.

Grounds for the Request for Annulment

It was argued that the contested provision did not serve the public interest, that it impaired the essence of the right to property and that it did not comply with the principle of proportionality, which was in breach of the Constitution.

The Court’s Assessment

The main characteristic of the transactions falling into the scope of the contested provision is that although the property is transferred in return for a payment, the financial interest acquired by the debtor is not equivalent to the advantage afforded to the other party. This provision enables the creditor to prove that in the transaction, the debtor accepted a price much lower than the value of the property he transferred. Therefore, this situation is sufficient to consider the transaction as donation.

It is possible to claim and prove the contrary, as well as it is also possible for the debtor or the third party to whom the property was transferred to prove that the property was transferred at its true or approximately true value, to make claims and defence in this respect and to prevent the cancellation of the transaction by submitting relevant information, documents and evidence. Accordingly, it cannot be said that the contested provision disturbed the fair balance between the public interest and the individual’s rights and freedoms and that it did not comply with the principle of proportionality.

Consequently, the Court concluded that the contested provision was not in breach of the Constitution and therefore dismissed the request for annulment.

This press release prepared by the General Secretariat intends to inform the public and has no binding effect.

The Constitutional Court of the Republic of Turkey © 2019