On February 29, 2024, the Supreme Court of Argentina (hereinafter, “SC” or the “Supreme Court”) rendered a decision in the case “Oliva, Fabio Omar v. COMA S.A.”, overturning the annual, regular, and consecutive capitalization of interest applied by the National Labor Court of Appeals of the City of Buenos Aires (“CNAT”) through Act No. 2764/2022 (the “Act”).
The Act stipulated that the interest rates applicable to labour claims would be those specified in CNAT Acts No. 2601/14, 2630/16, and 2658/17, with the additional provision of interest capitalization on an annual basis, commencing from the date of service of the complaint notice.
The practical implications of this decision led to a considerable escalation in the interest amount payable following an adverse court ruling, since the CNAT Courts’ practice was to capitalize interest annually, regularly and consecutively (i.e. once a year, every year) from the date of service of the complaint until the settlement date of the judgement.
Through this new ruling, the Supreme Court determined that the annual, regular, and consecutive capitalization method applied in accordance with the Act was inconsistent with the provisions of the National Civil and Commercial Code concerning interest calculation.
Furthermore, the SC determined that the annual, regular, and consecutive capitalization of interest had resulted in a disproportionate and unsupported economic outcome that exceeded any reasonable standard.
Therefore, the SC concluded that the appealed judgment lacked a reasoned interpretation of the laws applicable to the proven facts of the case and thus and overturned it.
In practice, the judgement rendered by the SC significantly reduces the expenses associated with an adverse ruling in labour court claims.
It is anticipated that in the short term, the judgments from the CNAT Appellate Courts will align with the SC’s decision and discontinue the application of annual, regular, and consecutive interest capitalization.
