Financial Penalties for Arrears in Commercial Leasing in Ukraine: Fines, Late Fees, and the NBU Discount Rate

Ukrainian law provides specific mechanisms for landlords to manage payment defaults in commercial leasing. Commercial courts enforce financial penalties stipulated in lease agreements, provided they comply with the Commercial and Civil Codes of Ukraine.

1. Late Fees and the Statutory Framework

In commercial contracts, the primary tool for sanctioning defaults is the Late Fee (Penya), which accrues for every day of delayed payment. The legal framework distinguishes between private commercial contracts and those involving the state sector.

Contracts Between Private Economic Entities

For private economic entities (B2B), the principle of freedom of contract applies. Parties may agree on any penalty amount within the lease agreement. However, under Article 233 of the Commercial Code of Ukraine, courts maintain the discretion to reduce a penalty if it is excessively large compared to the actual losses suffered by the landlord or if the debtor is in a difficult financial position. While the "double NBU rate" is often used as a benchmark for reasonableness in judicial practice, there is no automatic statutory cap for private commercial contracts; such rigid limits apply exclusively to state-funded or state-owned obligations.

State-Related Obligations

The Law of Ukraine "On Responsibility for Late Fulfillment of Monetary Obligations" (543/96-VR) imposes a specific limit on late fees for obligations where the debtor is a state-owned enterprise or the obligation is funded by the state budget. In these cases:

• The late fee cannot exceed double the discount rate of the National Bank of Ukraine (NBU) in effect during the delay period.
• If the contract is silent, Article 231 of the Commercial Code stipulates a penalty of 0.1% of the overdue amount for each day of delay, plus a fine of 7% if the delay exceeds 30 days.

2. Lump-Sum Fines (Fixed Penalties)

To supplement daily late fees, landlords often include fixed penalties for systemic or significant breaches.

Fixed Fine (Shtraf): According to Article 231 of the Commercial Code, a landlord may stipulate that a daily late fee (penya) and a one-time fine (shtraf) are levied simultaneously.

Common contractual structures include:

• A daily late fee for the initial period of delay.
• A one-time fine (e.g., 7% to 20% of the debt) if the delay exceeds a specific threshold (e.g., 10 or 30 banking days).

This combination of daily accruals and one-time penalties is a standard practice in Ukrainian commercial leasing to address the costs of debt recovery.

3. Statutory Protections: Article 625 of the Civil Code

Beyond contractual penalties, Article 625 of the Civil Code of Ukraine provides statutory protections for landlords that apply unless otherwise specified in the contract:

1. 3% Annual Interest: The landlord is entitled to 3% annual interest on the overdue amount for the duration of the delay, unless another rate is established by the contract or law.
2. Inflation Adjustment: The landlord may claim compensation for the "inflation index" for the period of delay. This ensures the debt maintains its value relative to inflation.
   • Note: Inflation adjustments are typically not applicable if the debt is pegged to a stable foreign currency (e.g., USD or EUR), as the exchange rate adjustment is deemed to cover the loss of value.

Landlords must ensure that all penalty calculations are grounded in the specific terms of the lease and the relevant articles of the Civil and Commercial Codes.

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