Rules for Calculating Debts under Article 625 of the Civil Code of Ukraine to Be Reviewed

The Supreme Court of Ukraine has referred a case on the recovery of inflation losses for breach of a monetary obligation to the Second Judicial Panel of the Cassation Civil Court. The key issue concerns the legality of accounting for deflation periods, when the inflation index is below 100%. Previously, courts often excluded months of deflation from calculations.

The Second Judicial Panel of the Cassation Civil Court may establish a new approach to applying Article 625 of the Civil Code of Ukraine, which will unify the practice of civil and commercial courts and ensure a fair scope of debtor liability.

Proposed Approach

It is proposed that the debt amount, adjusted for the inflation index, should be calculated as a single mathematical chain for the entire period of delay, eliminating the possibility of selectively ignoring certain months. The court emphasizes that if the inflation index is less than one during certain periods (deflation), this does not change its legal nature and cannot justify skipping such a month in the calculation under part 2 of Article 625 of the Civil Code of Ukraine.

This approach aims to achieve two objectives:

• Ensure fairness for the debtor, who must be confident that periods of currency strengthening (deflation) are correctly accounted for in the total scope of their liability.
• Prevent unjust enrichment of the creditor, who is not entitled to an additional advantage through artificially inflated amounts by excluding deflationary months from the calculation.

Ignoring deflation is considered a mathematically incorrect operation, which disrupts the sequence of calculations prescribed by law and distorts the real extent of monetary depreciation over the entire delay period.