Supplier required charging interest under two articles for one late payment period

The supplier required charging both types of interest to the customer for one late payment period. The Court of Cassation supported the conclusion that such concurrent charging is a double liability. Note that, according to the SCRF Plenum, the interest stipulated in Art. 317.1 of the CCRF is not a liability. Interest charged under Art. 395 of the CCRF from the beginning of the late payment period does not affect the charging of legal interest.

Document: Decision of the Moscow District Court of Arbitration on case No. А41-102819/2015 dated 22 August 2016

In its Resolution No. 7 dated 24 March 2016, the SCRF Plenum clarified the CCRF provisions on the liability for breach of obligations. Worthy of special attention are the recommendations on applying the recent provisions of CCRF, for example, those regarding interest on a money obligation.

The procedure of taking actions under Art. 395 of CCRF:

  1. A debtor may voluntarily pay interest on borrowed funds, regardless of the money obligation repayment priority (SACRF’s position) established by the RF Civil Code.
  2. The money obligation repayment priority established by the RF Civil Code does not prohibit a creditor from demanding a penalty or interest on borrowed funds before repayment of the principal (SCRF’s and SACRF’s positions).
  3. The creditor may charge interest on borrowed funds simultaneously to the principal and subsidiary debtors, irrespective of whether or not a principal collection claim was brought against the latter (SACRF’s position).
  4. The creditor may charge interest on borrowed funds to the surety for a delay in performing the core obligation (SCRF’s and SACRF’s positions).
  5. If third parties, to which performance was assigned, fail to meet the obligation, interest on borrowed funds shall be charged to the debtor, unless otherwise provided by law (SCRF’s and SACRF’s positions).
  6. Interest on borrowed funds shall be paid after repayment of the principal amount (SCRF’s and SACRF’s positions).
  7. Interest on borrowed funds shall be charged concurrently with a penalty as a fine (SCRF’s position).
  8. Generally, the rate of interest on borrowed funds may not be reduced in accordance with the penalty reduction rules (SCRF’s position).
  9. When lodging a claim for charging interest on borrowed funds, it is necessary to indicate the time from which the money obligation is considered overdue (SACRF’s position).
  10. The amount to be paid as interest on borrowed funds may vary over time, with the right to seek interest remaining unchanged.
  11. A lessee may not require payment of interest on borrowed funds with respect to the cost of permanent improvements to property until the cost is determined (SACRF’s position).
  12. In case of failure to fulfil a court order, interest on borrowed funds shall be accrued and charged given the availability of the respective statement of claim (SCRF’s position).
  13. A suit for charging only interest for nonperformance or delayed performance of a money obligation covered by the pre-arbitration procedure regulations may only be reviewed on the merits after the pre-arbitration procedure with respect to the principal amount or the interest amount has been complied with.
  14. If under Cl. 1, Art. 395 of the CCRF, the plaintiff requires levying a penalty for delayed performance of a money obligation, when a law or a contract provides for a forfeit penalty, the court shall not dismiss an action but shall suggest that parties discuss the issue of applying forfeit penalty norms to their legal relations (SCRF’s position).
  15. If the rate of interest calculated by a plaintiff under Art. 395 of CCRF exceeds the amount of penalty stipulated by law or a contract, the court, having established a violated money obligation, shall satisfy stated claims in part, i.e. within the amount of penalty to be collected (SCRF’s position).