CASE OF GALICH v. RUSSIA
Violation of Art. 6-1;Non-pecuniary damage - award
Alvina Gyulumyan;Anatoly Kovler;Corneliu Bîrsan;Egbert Myjer;Elisabet Fura;Josep Casadevall
6. The applicant was born in 1952 and lives in Omsk. 7. In May 2000 the applicant lent a sum of money to a private person, Mr M. The amount of the debt was linked to the exchange rate of the United States dollar. Mr M. failed to repay the full amount in due time, and on 19 April 2001 the applicant brought a civil action against him. The applicant sought to recover 141,800 Russian roubles (RUB) on account of the outstanding debt, plus statutory interest for the period of delay (проценты за неисполнение денежного обязательства). The amount of statutory interest was calculated on the basis of the refinancing rate of the Central Bank of Russia. 8. In the domestic proceedings the applicant was represented by a lawyer. Mr M., the defendant, claimed that he had returned RUB 45,000 to the applicant. However, he acknowledged the remainder of the principal debt, and accepted the calculations of statutory interest. 9. On 15 January 2002 the Kirovskiy District Court of Omsk partially granted the applicant’s claim. The court found that a part of the debt (RUB 45,000) had already been paid to the applicant. Given the exchange rate of the United States dollar at that moment, the court awarded the applicant RUB 106,500 (equivalent to 3,970 euros (EUR)) on account of the outstanding debt, plus RUB 34,611 (equivalent to EUR 1,290) as statutory interest under Article 395 of the Civil Code for 491 days of delay in paying the outstanding debt. To calculate the interest the court applied the annual refinancing rate of the Central Bank of Russia, which amounted to 25% at the time. 10. The applicant appealed. In the points of appeal he contested the finding of the first-instance court that a part of the principal debt had been returned to him. 11. On 27 February 2002 the Omsk Regional Court examined the appeal and dismissed it. The issue of statutory interest was not raised by the parties during the appeal proceedings. However, the court proprio motu reduced the amount of statutory interest awarded to RUB 10,000 (EUR 373), stating as follows: “In addition to the principal debt the court ordered recovery of statutory interest, in accordance with Article 395 of the Civil Code of the Russian Federation. At the same time, in the opinion of the court of appeal, the amount of interest – 34,611 roubles 44 kopeks – is disproportionate to the consequences of the breach of the obligation and is excessive. Consequently, the appeal court (кассационная инстанция) deems it necessary, pursuant to Article 333 of the Civil Code of the Russian Federation, to reduce the amount of the penalty to 10,000 roubles.” The overall amount awarded to the applicant was therefore reduced to RUB 116,500. That decision became final. 12. Article 395 of the Civil Code (“Responsibility for non-compliance with a monetary obligation”) provided, insofar as relevant, as follows: “For the use of monetary assets belonging to another person, as a result of their unlawful withholding, or the failure to pay them back ... a [statutory] interest should be paid .... The amount of that interest is defined as the refinancing rate [of the Central Bank of Russia] ... applicable in the place of residence of the creditor ... on the day of the execution of the monetary obligation. If the monetary debt is recovered through the court, the court may award [statutory] interest on the basis of the refinancing rate applicable on the day of lodging of the claim, or on the day of the delivery of the judgment. These rules are applicable unless another rate has been fixed by the law or by an agreement [between the parties] ...” 13. Article 333 of the Civil Code (“The Reduction of the Penalty”), insofar as relevant, stipulates as follows: “If a penalty due [for a violation of a contractual obligation] is obviously out of proportion to the consequences of the violation of the civil obligation, the court has the right to reduce the amount of the penalty ...” 14. Pursuant to Joint Ruling no. 13/14 by the Russian Supreme Court and the Supreme Commercial Court of 8 October 1998, Article 333 is applicable to the statutory interest provided under Article 395. In deciding whether or not to reduce the statutory interest payable, the courts “should take into account the fluctuation of the refinancing rate of the Central Bank during the period of delay, as well as other circumstances which may affect the rates of interest”. 15. Article 294 (“Scope of review of the case by the court of appeal”) of the Code of Civil Procedure of 1964, then in force, stipulated: “The [court of appeal] shall verify the legality and reasonableness of the first-instance court judgment within the scope of the appeal. It may examine new evidence and establish new facts. The court shall examine newly submitted evidence if it considers that the evidence could not have been submitted to the first-instance court. In the interests of legality, the court of appeal may examine the decision of the first-instance court in its entirety.”