The court may not reduce the minimum annual interest rate of three percent provided for in Article 625 of the Civil Code of Ukraine - SC GC

The three per cent per annum provided for in Art. 625 of the Civil Code of Ukraine (unless a different amount of interest is established by contract or law) is the statutory and minimum amount of interest per annum that a creditor may rely on in case of improper performance of an obligation by the debtor, which cannot be reduced by the court.

This conclusion was reached by the Grand Chamber of the Supreme Court in a case on recovery of inflationary losses and three per cent per annum.

In the circumstances of the case, a municipal enterprise and a LLC entered into a contract for the performance of works and provision of services. Due to the improper performance of the contract by the ME and late payment under the contract, the debt was incurred and recovered in favour of the LLC by court order. The defendant later repaid the debt in full in instalments by 2 April 2024. At the same time, the plaintiff believed that, in addition to the debt under the agreement, the defendant should also pay inflationary losses and three per cent per annum.

Taking into account the long accrual period, full repayment of the principal debt and the debtor's difficult financial situation, the courts of first instance and appeal reduced the amount of three per cent per annum and recovered it only for the period from 2 April 2017 to 1 April 2024, while refusing to recover the amounts for the period from 13 March to 1 April 2017 due to the expiry of the limitation period.

During the cassation review of the case, the Grand Chamber of the Supreme Court noted that during the quarantine and martial law, the legislator applied a new construction, which temporarily supplemented the list of circumstances affecting the limitation period, namely the extension of the limitation period.

Taking into account the relevant legislative changes, the Grand Chamber of the Supreme Court concluded that if the limitation period had not expired as of 2 April 2020, the limitation period was first extended (until 30 June 2023 - for the duration of the quarantine, and further until 29 January 2024 - for the duration of martial law), and from 30 January 2024, the limitation period was suspended for the duration of martial law.

Therefore, since the limitation period in this case has not expired as of 2 April 2020, it is reasonable to file a claim for inflationary losses and three per cent per annum accrued for the period from 2 April 2017 to 1 April 2024, i.e. without limitation to the last three years preceding the filing of the claim.

The Grand Chamber of the Supreme Court also determined that, given the legal nature of interest per annum as a statutory payment by the debtor for the use of the creditor's funds, its amount may be reduced.

In determining the amount to which the annual interest may be reduced, the court is limited by the provision of part 2 of Article 625 of the Civil Code of Ukraine, which states that the debtor must pay the creditor three per cent per annum (unless a different rate of interest is established by agreement or law) of the overdue amount.

The interest rate of three per cent per annum (unless otherwise provided by the agreement or the law) is the statutory and minimum amount of interest per annum that a creditor may rely on in case of improper performance of an obligation by the debtor, which cannot be reduced by the court.

Thus, three per cent per annum was not subject to reduction by the courts, and therefore the claims for recovery are justified.

Resolution of the Grand Chamber of the Supreme Court of 2 July 2025 in case No. 903/602/24 (proceedings No. 12-19гс25) - https://reyestr.court.gov.ua/Review/128845028.

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