Avoiding the time-bar – conciliatory proceedings

15.03.2016 r.

Avoiding the time-bar – conciliatory proceedings

Conciliatory proceedings – an institution often undervalued and overlooked by many – is a judicial tool commonly used in Poland, in order to interrupt the running of the limitation period for different types of claims. Due to its various advantages over litigation measures, it is widely accepted as a means of extending the time in which the claimants can pursue their claims against their debtors.

Conciliatory proceedings’ attractiveness stems out, among other things, from the fact that they are significantly cheaper than litigation, with court fees ranging from 40 to 300 PLN (ca. 10 to 70 EUR). Furthermore, they are much less formalised, with more relaxed procedure on submitting and analysing evidence (which otherwise in Poland is extremely strict). They can end with the parties reaching a settlement before the court or – alternatively – with the court stating that no settlement could be reached, without any negative consequences for the claimant.

A call for conciliatory proceedings is used commonly by those who are faced with a quickly approaching time bar, yet need more time in order to prepare the case, gather evidence to be produced in court or – often – bring already begun negotiations to a close.
Thusly, the nature of conciliatory proceedings makes them a favoured tactic undertaken by entrepreneurs from the transport and logistics sector, where time bar periods are shorter than the average.

Under the provisions of the Polish Civil Code, claims arising from one’s business activity become time-barred after three years. However, there are many exceptions from this general rule, with transport-related claims being a perfect example. Under Polish law, generally, the time-bar period for claims related to domestic road carriage, forwarding services and inland waterways transport is limited to just one year. The same applies to international regulations, with one-year time-bar period general rule applying to the in the CMR Convention, the CMNI Convention and the COTIF Convention (CIM).

Of course in some cases, these periods of limitation shall be longer (as is the case with wilful misconduct and gross negligence under the CMR Convention, claims under Montreal Convention and some types of claims under CIM). There are however situations, where the claims become time-barred much quicker, as is the case with recourse claims of a forwarder against a carrier (under the provisions of Polish Civil Code), or claims for delay in domestic transport, with the latter being just two months under Polish regulations.
No wonder then that faced with such relatively short limitation periods and – at the same time – extreme formalism of the Polish courts when it comes to litigation, Polish businesses from the transport sector more and more often take to conciliatory proceedings using them instrumentally, without the aim of reaching a settlement before court, but rather in order to thoroughly prepare themselves for either proper litigation or for extended negotiations outside the court.

However, using this institution correctly is not always as easy as it may seem. The call for conciliatory proceedings is effective in interrupting the running of the time-bar period, as it is considered “an act before the court, performed directly either to vindicate or to establish, or to satisfy or to secure a claim”. If, therefore, the opposing party manages to prove that the only purpose of the call was to extend the time-bar period and the applicant never intended to enter any kind of settlements or any other form of conciliation before the court, the motion for conciliatory proceedings may prove ineffective. However, with proper wording of the motion, the possibility of it proving ineffective is a extremely small if not non-existent.

Unfortunately, up until now it remained unclear whether one can successfully interrupt the running of a time-bar period more than once, by filing a second motion for conciliatory proceedings before the lapse of the extended limitation period. The general notion shared by Polish jurisprudence was that it was not possible to successfully break the time-bar by filing a second (consecutive) motion for the same claim.

Polish courts argued that once the first attempt at reaching the settlement between the parties has proven unsuccessful, further calls for conciliatory proceedings would be redundant, as the outcome of such proceedings was a predictable failure.

This was especially relevant and particularly damaging for insurers seeking recourse claims, who often had troubles in obtaining full claim documentation from their insured, either due to faulty communication between them and the insured or because a long chain of subcontractors was involved. After all, more often than not, it takes the insurers some time to obtain all relevant documentation, or successfully negotiate a settlement with the debtor. Thus, oftentimes, one-time extension of the time bar period may prove to be insufficient.

Lately, however, the idea that a second call for conciliatory proceedings is ineffective in interrupting the limitation period has been overturned by the ruling of the Polish Supreme Court, issued on the 28 January 2016 (file ref.: III CSK 50/15).

The Supreme Court, upon having carefully considered the merits of the case, resolved that there are no reasonable grounds for accepting the notion that a repeat motion for conciliatory proceedings does not interrupt the running of the limitation period.

Elaborating on the reasoning behind its decision, the Court pointed out that there is no reason to expect that a second (or further) conciliatory hearing might not lead to both parties reaching a settlement, just because previous hearings in that regard have failed.
Thusly, a successive motion for amicable proceedings does not differ from a first motion in that it too can be considered “an act before the court, performed directly either to vindicate or to establish, or to satisfy or to secure a claim”. Thus, such consecutive motion meets the criteria stipulated in art. 123 §1 pt 1 of the Polish Civil Code.

The above means that is possible to effectively combat the expiration of the time-bar period over a prolonged period of time, simply by filing multiple, consecutive calls for conciliatory proceedings, with having each one submitted to the court before the next time-bar date.

The significance of the ruling is that it gives everyone – in particular the insurers and recourse agents – a serious, yet simple and cheap tool to combat the expiry of their claims. It allows them to prepare resources necessary to effectively pursue their claims either before the court, or through negotiations.