After a long period of time, particularly from 1942 to 1990, during which the Italian legal interest rate was fixed at 5% per year, and the national jurisprudence allowed supplementary adjustments for inflation in order to avoid unduly awarding the defaulting debtor, Italian legislators have begun to fiddle with legal interest. Over the past few years, the legislators initially doubled the rate to 10%, with the declared objective of, inter alia, reducing frivolous resistance against debt collection actions, which was previously and artificially encouraged by the inadequacy of legal interest as a deterrent for outstanding debts. Then they reduced the rate(s) again to 5%, and again, from the beginning of 1999, to 2.5%, placing the legal rate substantially below not only the prime lending rate, but also the normal earning power of money, however invested.
Such an inconvenient reform, which will heavily weigh on the judicial system as well as (the) on the execution of judgements, confirms and strengthens the opportunity to timely undertake appropriate collection initiatives every time there is an overdue debt.
The importance must also be stressed of utilising, whenever possible, contractual interest rates, to be proved under Italian law through documentary evidence, or at least to collect any evidence related to the patrimonial damages exceeding the legal interest, which were suffered as a consequence of the delay, such as for instance that pertaining to the financial costs incurred in the same period.
Another strategy, especially in international transactions, is that of adopting choice of law clauses that guarantee the application of national laws awarding more substantial legal interest. Many European countries, including England, are moving, albeit with some degree of caution, exactly in the opposite direction than that of the Italian legal system, and the Italian court, according to the Rome Convention and the recent reform of the Italian international private law, fully recognise the will of the parties in this respect, provided that such clauses do not interfere with consumer's protection provisions.
For further information contact Studio Legale Sutti .
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