The Polish Parliament has adopted an amendment to the provisions on the running of limitation periods. It aims to finally eliminate the practice of initiating conciliation proceedings primarily or even exclusively in order to extend the statute of limitations. Creditors contemplating court action should certainly take note of this change.
As in most countries, Polish law specifies limitation periods, the lapse of which allows a debtor to avoid satisfaction of a claim. Owing to this regulation, it is quite common for creditors who are unprepared or still hesitant to be forced to initiate court action out of fear that further inaction could result in a claim being time-barred.
In recent years many creditors have dealt with that challenge by filing requests for conciliation proceedings with the courts. These are aimed at having the parties resolve the matter under the supervision and direction of the court.
Conciliation proceedings are a special kind of court proceedings, in which the court invites the parties to a hearing where, under the direction of a judge, they discuss the possibility of a settlement. In these proceedings, no verdict is issued and the court does not examine the merits of the claim, focusing mainly on inducing the parties to settle. Due to such nature of conciliation proceedings, their initiation does not require the preparation of extensive evidence and involves court fees that are significantly lower than in a regular court case.
In reality, requests for conciliation proceedings are very often made in cases where the possibility of reaching an agreement with a debtor is very unlikely. Usually the real reason for such action is the effect it has on the run of the limitation period. Despite the lack of specific regulation on the subject, it is common opinion that the limitation period ceases to run when a request for conciliation is filed even if such action ultimately has no effect. It is also commonly believed that once conciliation proceedings are completed, a new, full limitation period starts.
This practice has led to a great increase in the court’s workload and a perversion of the institution of conciliation proceedings, which originally were intended to be an additional opportunity for parties to settle their cases in an amicable and efficient manner under the court’s guidance.
The above practice was significantly curtailed by an increase in court fees introduced a little over two years ago. Now, the Polish legislature has decided to get to the heart of the problem and regulate the impact of the conciliation proceedings on the running of limitation periods. As a result, the commencement of conciliation proceeding will no longer cause the run of the limitation period to cease but will only suspend it for the duration of the conciliation proceedings. At the conclusion of these proceedings, which usually happens after just one hearing, the initial limitation period will resume, rather than a new, full limitation period beginning, as before.
It is expected that the amendment will significantly reduce the number of requests for the courts’ conciliation and eliminate the current practice of resorting to this action solely to gain more time to prepare a proper court case.
As clearly follows, the new regulation takes away the important benefit to the creditor of commencing conciliation proceedings consisting of extending the limitation period and gaining more time to consider and possibly prepare a court case. Importantly, the transitional provisions provide that the amendment will apply only to requests for conciliation filed after the new law enters into force, i.e. June 30th, 2022. Therefore, creditors considering initiating court proceedings should pay attention to this date, as only conciliation proceedings initiated prior to this date will make it possible to restart the limitation period in the event of unsuccessful conciliation.