The end of a device to evade the statute of limitations?
As of 30 June 2022, a summons to attempt a settlement, or commencement of mediation, will no longer interrupt the limitations period for claims. Instead, the limitations period will be suspended for the duration of these proceedings. Is this the end of an easy method to evade the statute of limitations? And have lawmakers carefully considered the consequences of suspending time limits that now usually expire at the end of the calendar year?
No more interruption of the limitations period
This change in Polish civil procedure has been adopted as part of a broader amendment under the Act of 2 December 2021 Amending the Civil Code, the Civil Procedure Code and Certain Other Acts. Compared to most laws in recent years, the amending act includes a long grace period of six months, and takes effect on 30 June 2022.
First of all, Art. 121 of the Civil Code, concerning suspension of the limitations period, will change, as the list of events with this effect is extended to include mediation or conciliation initiated pursuant to a summons to attempt to reach a settlement.
Previously, such actions led to interruption of the limitations period. This made the summons to attempt settlement a popular institution, as the interruption occurred regardless of whether the adversary attended the conciliation meeting or agreed to a settlement. In the case of mediation, because it is strictly voluntary, the limitations period was only interrupted if the other party agreed to participate in mediation. Thus mediation never became a mechanism for claimants to extend the limitations period.
The justification of the amendment clearly shows that the parliament took a dim view of the practice of requesting an attempt at conciliation to avoid expiration of the limitations period. This practice is the target to be eliminated by the amendment. It is not the first attempt in recent years, as the drastic increase of the fees for applying to attempt settlement to one-fifth of the principal court fee on the main claim (up to PLN 40,000) had the same purpose.
Is suspension like interruption?
Suspension and interruption of the limitations period differ fundamentally. When the running of the limitations period is “interrupted,” the time limit begins to run anew, and thus, by default, for an “additional” six years or three years (depending on the claim, Civil Code Art. 118). But “suspension” temporarily stops the running of the limitations period (or suspends commencement of running of the limitations period) for the duration of the event causing the suspension.
The differences in the effect of application of these two institutions were equally significant and clear under the original code rules for calculation of the expiration of the limitations period, i.e. as long as expiration occurred exactly at the end of the period in question, regardless which day of the year that was. But as of 9 July 2018, Art. 118 of the Civil Code was amended to provide that regardless of the day of the year when the limitations period runs out, “the end of the limitations period shall fall on the last day of the calendar year, unless the limitations period is shorter than two years.” Therefore, under current law, with the exception of the rather rare one-year time limits, the end of the limitations period for all claims falls on 31 December of the given year, so that on 1 January of the following year they are time-barred, with all the consequences that entails.
Applying this rule to the suspension of running of the statute of limitations, serious issues of interpretation arise, which will probably become more significant when conciliation proceedings, which have been so frequent in practice, are added to the grounds for suspension.
On one hand—and this seems more justified by the literal wording of the provisions, especially Art. 118 of the Civil Code—the suspension can only be considered to change the final time limit of the limitations period if the suspension extends beyond the end of the calendar year. Otherwise, the suspension will have no impact on the effective end of the limitations period.
This can be illustrated by an example. If a conciliation proceeding ran from 30 November 2022 (when an application to attempt settlement was filed) to 10 January 2023 (the date of the hearing where the court determined that no settlement had been reached), the end of the limitations period would have to be assumed to “fall on the last day of the calendar year” after the statute of limitations resumed running in 2023, i.e. 31 December 2023. In that case, a suspension of just a few weeks would advance the statute of limitations by a full year. But if the conciliation proceeding in the same case were initiated with an application filed on 1 July 2022, and continued through 30 December 2022, the time limit would ultimately not change at all, ending on the last day of the calendar year, i.e. 31 December 2022, even though the suspension lasted nearly six months.
As an alternative to that scenario, which seems to have an arbitrary effect, we could assume that the suspension causes the statute of limitations to be “extended” by the exact number of days the suspension lasts. For example, if mediation lasted from 31 December 2022 to 5 January 2023, the time limit would be extended by only six calendar days, i.e. to 11 January 2023. Although it seems to apply more fairly the effects of suspension of the limitations period, this solution is poorly supported by the wording of the regulations, in particular Art. 118 and 121 of the Civil Code, expressly defining suspension to mean that “the running of the limitations period does not commence, or if commenced, shall be suspended” (not “extended”).
But the point is debatable, and so far, to the author’s knowledge, there have not been any court decisions on the subject. If the first view were maintained, the institution of a summons to attempt a settlement would still retain its usefulness, and perhaps popularity, as a method to avoid expiration of the limitations period without commencing a full suit on the merits—but with all the restrictions, including a hefty fee for “extending” the limitations period by just one year.
What if not a summons to reach a settlement?
Either way, the amendment will drastically limit the claimant’s ability to interrupt (in the strict sense) the running of the limitations period on its claims without entering into litigation (or arbitration) with the defendant on the merits.
In this context, it is worth remembering that under Art. 123 §1 of the Civil Code, running of the limitations period is also interrupted by “any action before a court or other body appointed to hear the case …) taken directly … to secure the claim.” Among other things, an application for interim relief to secure a claim, filed prior to commencement of an action on the merits, would constitute such an action. In the case of monetary claims, this is also subject to a rather high fee, equal to one-fourth of the principal court fee on the merits (but in the case of non-monetary claims, e.g. for a declaratory judgment, for delivery of possession of goods, or for in-kind performance, it is only PLN 100), but it does interrupt—and not merely suspend—the running of the limitations period.
Additionally, as a rule, the adversary does not learn about the proceeding seeking interim relief until the relief is enforced by the claimant, which is an additional (tactical) advantage of this solution. Nor does it appear from the regulations that the effect of interrupting the running of limitations period is dependent in any way on the success of the application, the subsequent filing of a suit on the merits, or lifting of the injunctive relief.
However, it should be noted that compared to a summons to attempt a settlement, which is usually a short and simple document, preparing a professional application for interim relief usually requires more work, as it must substantiate the underlying claim and demonstrate a legal interest in obtaining interim relief. Assuming that this application will later be relied on by the claimant in its suit on the merits as evidence of interruption of the limitations period, the wording had better be plausible and conceptually consistent with the approach taken in the suit on the merits.
Time is of the essence
Nonetheless, until 30 June 2022, conciliation proceedings remain the most convenient method for interrupting the running of the limitations period. Applications for a summons to attempt a settlement filed before that date, i.e. on 29 June 2022 at the latest, will have the effect of interrupting the running of the limitations period, even if the conciliation proceedings themselves are probably still pending after the amendment enters into force. Therefore, claimants who have previously overlooked this have a final opportunity in the last few days of June to extend the limitations period for their claims in a relatively simple fashion (assuming the application truly seeks to reach a settlement and is not filed just to interrupt the limitations period, in which case it may be ineffective). Later it will not be so easy.
Maciej Zych, adwokat, Dispute Resolution & Arbitration practice, Wardyński & Partners
