THE INTEREST ON MONETARY OBLIGATION AS A FORM OF RESPONSIBILITY (THEORETICAL AND PRACTICAL ASPECTS)

Abstract

The article highlights the legal nature of the monetary obligation, which ensures the performance of the debtor’s obligation solely in monetary form. In the execution of the monetary obligation, a distinction is made between public-law obligations (when the obligated party is an entrepreneurial entity – a resident or non-resident, and the monetary obligation is fulfilled before the state) and private-law obligations (when the obligated party is a participant in civil turnover, and the obligation is only owed to another private party). The study examines the fundamental articles 403 and 625 of the Georgian Civil Code, which are key norms in civil law relations, in connection with other provisions. The article presents the idea that, prior to changes in civil legislation, there were no norms determining the interest in using another’s funds in the case of delayed monetary obligations. Therefore, when a breach of monetary obligations occurred under a contract, the aggrieved party (the creditor) often had to be compensated only by the imposition of a fine, which was determined by setting the annual interest rate.

When determining the interest rate limits, it is important to consider that penalties also serve a sanctioning function, ensuring the debtor’s disciplined behavior. Therefore, maintaining a balance is crucial. The article discusses the idea that, in recent years, in arbitration and court practice, interest charged on monetary obligations has often been treated as a penalty. This approach is most notably reflected in some interpretations of arbitration courts, according to which “compensation for the penalty for delayed payment can reach up to five percent annually.” In certain cases, arbitration courts have treated the interest on the use of another’s funds as a loss in the form of lost profits. However, in this case, it is impossible to explain the legislator’s position regarding the correlation between interest rates and losses. Interest is the cost of using funds, a certain equivalent of their value in economic circulation, which, by its legal nature, represents a specific measure of civil law. Legal responsibility, which cannot be attributed to either penalties or damages. Collecting interest for the use of another’s funds does not prevent creditors from satisfying their claims regarding legal actions or enforcement. Contractual penalties imposed on the debtor, including continuously enforced fines; the court cannot reduce the amount of interest payable on the grounds of disproportional results.

In judicial decisions and enforcement documents, the amount on which interest is calculated, the amount of interest, and the date from which it must be calculated must be indicated. The specific amount on which interest will be calculated should be determined by the relevant bank on the actual enforcement date of the court decision. In other words, the amount collected according to the court’s decision should be deducted from the debtor’s account and transferred to the creditor.

Another note regarding the application of the rules of liability for non-fulfillment of monetary obligations in arbitration and court practice. The excessively narrow and formal interpretation of these norms has been recognized as unacceptable, which has manifested in practice. The concept of “foreign funds” not only includes money belonging to another person but also money intended for the counterparty, which is an obligation for supplied (sold) goods, completed work, or services rendered, even though the funds are not formally “foreign” to the debtor, etc.