CONTROVERSIAL ISSUES IN THE ACCRUAL OF INTEREST ON NATURAL OBLIGATIONS

<jats:p>The article addresses current issues arising in judicial practice concerning the classification of obligations as natural obligations and the possibility of accruing and recovering interest in respect of such obligations. It is argued that, at present, heterogeneous obligations have been grouped under the category of natural obligations without sufficient justification, thereby precluding the adoption of a uniform approach to the resolution of specific disputes. Since the concept of “natural obligations” in civil law theory encompasses a rather diverse range of obligations, the article proposes, for analytical purposes, distinguishing between two categories of breached contractual obligations: (1) obligations that have become time-barred as a result of the court’s application of the statute of limitations upon the debtor’s plea; and (2) obligations in respect of which the creditor’s claims have been upheld by a final court judgment but have not been satisfied in enforcement proceedings. The article argues that, because an unenforced court judgment constitutes, in essence, a legal anomaly, obligations in respect of which the creditor’s rights have been judicially recognised but not restored through enforcement proceedings cannot be transformed into natural obligations as obligations “not enforceable by judicial means.” From a constitutional perspective, the binding force of a court judgment constitutes an indispensable element of every person’s right to effective judicial protection. It is further substantiated that an obligation is not extinguished where the court judgment remains unenforced, even though the possibility of compulsory enforcement through enforcement proceedings has been lost. Particular attention is devoted to the possibility of accruing annual interest where enforcement proceedings have been terminated following the return of the writ of execution to the court pursuant to Part 3 of Article 63 of the Law of Ukraine “On Enforcement Proceedings.” The article concludes that such obligations cannot be regarded as natural obligations, since the creditor’s right to judicial protection has already been exercised. Accordingly, the creditor remains entitled to recover the amounts provided for in Part 2 of Article 625 of the Civil Code of Ukraine, which may be accrued within the applicable three-year limitation period.</jats:p>