A. Introduction
1. The Concept of Lex Commissoria and Its Etymological Origin
Lex commissoria is a significant legal principle that has its roots in Roman law and continues to protect debtors in modern legal systems. In Roman law, agreements were made where the ownership of pledged property would be transferred to the creditor if the debtor failed to fulfill the debt. However, this practice often led to the exploitation of debtors, as their property could be unfairly taken away. To prevent this, the prohibition known as lex commissoria was introduced in Roman law to protect debtors from such unfair outcomes.
Etymologically, lex means "law" or "rule" in Latin, and commissoria comes from the verb "committo," meaning "to combine" or "to bring together." Together, lex commissoria refers to a contractual clause where the ownership of pledged property would be transferred to the creditor if the debtor defaults. In Turkish, this term can be translated as "contractual condition" or "clause attached to a contract," which plays an essential role in ensuring legal security.
2. What Is Lex Commissoria Prohibition?
In Turkish law, the lex commissoria prohibition refers to the invalidity of any agreement stipulating that the ownership of pledged property will be transferred to the creditor if the debtor fails to pay the debt. The Turkish Civil Code (TCC) regulates this prohibition in Article 873 for immovable properties and in Article 949 for movable properties. These articles ensure that the creditor cannot automatically obtain ownership of the pledged property if the debt remains unpaid. Instead, the creditor’s right is limited to recovering the debt through the sale of the pledged property.
The prohibition is not only limited to movable or immovable property pledges, but it can also extend to other forms of collateral agreements and security rights, such as the pledge of receivables. The lex commissoria prohibition thus protects debtors from losing ownership of pledged assets without proper legal process.
Numerous court rulings from the Turkish Court of Cassation have reaffirmed the validity and enforcement of this prohibition. For instance, in a case where a contract stipulated that shares would pass to the creditor if the debt was unpaid, the Court ruled that this clause was invalid under the lex commissoria prohibition (Court of Cassation 11th Civil Chamber, E. 2001/7126, K. 2011/9409).
3. Purpose and Legal Foundation of the Prohibition
The main purpose of the lex commissoria prohibition is to protect the debtor, who is often in a weaker bargaining position than the creditor. The law aims to prevent the creditor from unfairly benefiting from the debtor’s financial difficulties by taking ownership of pledged property.
The prohibition also ensures that the creditor can only collect their debt through the sale of the pledged property, without taking the full ownership of the asset, particularly when the value of the property exceeds the amount of the debt. Without this prohibition, creditors could exploit the situation and obtain assets that are worth significantly more than the debt itself, leading to unjust enrichment.
The purpose of this prohibition is summarized in a decision by the 14th Civil Chamber of the Court of Cassation: "This rule aims to prevent the creditor from fraudulently acquiring immovable property when the debtor cannot fulfill the payment" (Court of Cassation 14th Civil Chamber, E. 2011/8337, K. 2011/10611).
4. Conditions for the Application of the Prohibition
For a contract to fall under the scope of the lex commissoria prohibition, the following conditions must be met:
Existence of a clause or agreement transferring ownership of the pledged property to the creditor: The contract must include a provision stating that the ownership of the pledged property will pass to the creditor if the debt is not paid.
The clause or agreement must be made before the debt becomes due: The agreement must have been entered into before the maturity of the debt.
The agreement must be intended to benefit the creditor: The clause should aim to grant ownership rights to the creditor if the debtor fails to pay the debt on time.
B. Lex Commissoria Prohibition in Turkish Law
1. Regulations in the Turkish Civil Code
The Turkish Civil Code explicitly regulates the lex commissoria prohibition for both immovable and movable property pledges. Article 873 of the TCC states that any provision transferring the ownership of pledged immovable property to the creditor upon non-payment is invalid. Similarly, Article 949 of the TCC prohibits clauses that stipulate the transfer of ownership of movable pledged property to the creditor if the debt is not paid.
These provisions provide critical protection for debtors, ensuring that creditors cannot take full ownership of the pledged property. The creditor’s rights are limited to recovering their debt through the sale of the pledged asset.
2. Lex Commissoria Prohibition in Commercial Law
In Turkish commercial law, the lex commissoria prohibition also plays an important role. The now-repealed Article 919 of the former Turkish Commercial Code (TCC 6762) explicitly prohibited the transfer of ownership in the case of ship mortgages, but the current TCC 6102 does not include such a provision. Nevertheless, under Article 1014 of the TCC, the creditor’s rights in ship mortgages are still limited to collecting their debt from the sale proceeds of the ship. Therefore, the lex commissoria prohibition continues to apply, aligned with the general principles of the Turkish Civil Code.
3. Scope of the Prohibition
The lex commissoria prohibition applies not only to pledged movable and immovable properties but also to other forms of collateral agreements. Many types of contracts designed to secure debts are subject to this prohibition, including mortgage-backed bonds, annuity bonds, and land charges. Although these forms of collateral are provided for in the legislation, their application is generally rare in practice.
Moreover, the prohibition extends to other types of security interests such as pledges on receivables and fiduciary transfer of ownership, ensuring that creditors cannot unfairly gain ownership of assets beyond the value of the debt.
4. Fiduciary Transactions and Lex Commissoria
Fiduciary transactions are often used to secure debts, where the debtor or a third party transfers ownership of an asset to the creditor temporarily, with the understanding that the asset will be returned once the debt is paid. However, even in such cases, the lex commissoria prohibition applies. If the debt is not paid, the creditor cannot retain ownership of the asset.
These fiduciary transactions, though legally valid, must not be used to circumvent the lex commissoria prohibition. In some cases, they may be deemed fraudulent if their sole purpose is to bypass the prohibition and unfairly enrich the creditor.
C. Mortgages and Lex Commissoria
1. Establishment of Mortgages
A mortgage is a security interest in immovable property that allows a creditor to secure repayment of a debt. Article 856 of the Turkish Civil Code regulates the establishment of mortgages, requiring registration in the land registry for the mortgage to be valid. This registration serves as public notice to third parties and establishes the creditor’s rights against the property. However, even with a valid mortgage, the creditor cannot acquire ownership of the property under the lex commissoria prohibition.
2. Legal Nature of Mortgage Contracts
A mortgage contract is typically entered into between the creditor and the owner of the immovable property as a security for a debt. However, under Turkish law, such a contract cannot contain any provision that allows the creditor to take ownership of the mortgaged property if the debt is unpaid. According to Article 873 of the TCC, any such clause would be invalid. The creditor’s right is limited to recovering their debt through the sale of the property.
3. Mortgages on Third-Party Property
It is possible for a third party to pledge their immovable property as collateral for another person’s debt. However, even in such cases, the creditor cannot take ownership of the property under the lex commissoria prohibition. The third party’s responsibility is limited to allowing the sale of the property, and the creditor can only collect the debt from the proceeds of the sale.
D. Consequences of Violating the Lex Commissoria Prohibition
Under the Turkish Civil Code, agreements that violate the lex commissoria prohibition are deemed void. Any clause in a contract that contravenes this rule is automatically null and void, with no legal effect. There are two main views in Turkish legal doctrine regarding the consequences of violating the prohibition:
Mandatory Partial Nullity: This view holds that only the part of the contract violating the prohibition should be deemed null and void, while the remainder of the contract can remain valid.
Partial Nullity: The dominant view in Turkish legal doctrine is that a contract can be partially void if certain conditions are met, and the contract can still be enforced without the illegal clause.
E. Conclusion
The lex commissoria prohibition is a critical legal principle aimed at protecting debtors from exploitation by preventing creditors from obtaining ownership of pledged property beyond the value of the debt. Under this prohibition, creditors cannot automatically acquire ownership of mortgaged or pledged property, even if the debtor fails to repay the debt. Instead, they must seek repayment through the sale of the property. This rule has its roots in Roman law and continues to play an essential role in modern legal systems, including Turkish law, where it serves as a safeguard against unfair enrichment of creditors.
