Landmark Decision by the Turkish Constitutional Court on Sales Transactions Between Spouses

Landmark Decision by the Turkish Constitutional Court on Sales Transactions Between Spouses

The phrase "between husband and wife" in Article 278/3 of the Bankruptcy and Enforcement Code No. 2004 [“BEC”] was annulled by the Constitutional Court on March 22, 2022. The annulment will take effect 9 months after its publication, on December 22, 2022.

What Does BEC Art. 278 Regulate?     

In the Turkish legal system, a creditor who is unable to collect their debts through enforcement proceedings may request from the court the annulment of the debtor's transactions for the purpose of hiding assets. While Article 277 of the BEC contains general rules on action for annulment of transaction, Article 278 regulates the annulment of gratuitous transactions.

In this context, the article subject to the Constitutional Court decision constituted an uncontradictable assumption where every transaction between spouses and other related parties were considered to be gratuitous. As a result, these transactions concluded within the last two years could be nullified by court decisions. For example, following a reciprocal transaction between spouses, if one of the husband's creditors applied to court for the transaction to be annulled, the transaction between the husband and wife would directly be deemed gratuitous and ultimately invalidated.

The issue was brought before the Constitutional Court with the argument that the uncontradictable categorization of these transactions as gratuitous contracts is unconstitutional. Constitutional Court, in its judgment, decided that the assumption of all transactions between spouses as gratuitous transactions is neither necessary or required for the fulfilment of the purposes, which are to eliminate the difficulties the creditor may experience regarding their burden of proof, or to prevent concealment of assets.

The Constitutional Court further ruled that the assumption established by BEC Art. 278 disrupted the balance between public and private interests, and that right to seek legal remedies and property right were unjustly constrained. As a result, the phrase "between spouses" in BEC Art. 278/3 is removed.

Possible Outcome of the Constitutional Court Decision

As the annulment judgment will take effect 9 months later, the legislative branch is likely to act to alter the relevant part of BEC Art. 278, which was deemed to be unconstitutional, and to replace the uncontradictable assumption envisioned in this paragraph with a disprovable presumption. To put it another way, the problem can be resolved by introducing an amendment that allows the debtor wife or husband to prove that the contract was reciprocal.

In its current form, unless Article 278 of the BEC is amended within 9 months, the provision that establishes the assumption for transactions between spouses will be annulled, and the burden of proof regarding these transactions will shift to the creditor who alleges that the savings are gratuitous and thus invalid. If the Parliament does not adopt a new amendment in the annulled article during this timeframe, it is possible that concealment of assets via such transactions may increase and as a result, disputes would arise.