Will the Supreme Court resolve the problems with settlement attempts? | In Principle

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Will the Supreme Court resolve the problems with settlement attempts?

The Supreme Court of Poland has presented to an expanded panel legal questions concerning a summons to attempt a settlement as an action interrupting the limitations period on a claim.

On 16 October 2020, in case no. IV CSK 107/20, the Supreme Court presented the following legal issues to an expanded panel for resolution:

  • Can a summons to attempt a settlement interrupt the running of the limitations period on a claim, and, if so, does the interruption of the limitations period depend on whether the claimant, having regard to the conduct of the debtor, could reasonably believe that the conciliation procedure would lead to a settlement?
  • If a summons to attempt a settlement results in a conciliation procedure, is it permissible to find in the proceeding on the merits that it did not interrupt the running of the limitations period on the claim?

The first question concerns whether, in light of its construction, a summons to attempt a settlement can be classified at all as an action interrupting the running of the limitations period, referred to in Art. 123 §1(1) of the Civil Code. It appears to be well established in the case law that the answer is yes, but this view was criticised in the legal literature because of the requirement in Art. 123 §1(1) that an action taken before a court or other body appointed for that purpose should aim directly at investigation, determination or satisfaction of the claim. The supporters of that criticism argued that, in practice, the institution of a summons to attempt a settlement was often used as a means of extending the limitations period on claims, rather than a good-faith desire to settle the case amicably. Lawmakers took note of this phenomenon and decided to limit it by significantly increasing the fee for a summons to attempt a settlement.

Even if we recognise that a summons to attempt a settlement can result in interruption of the limitations period, this does not necessarily mean that this effect is triggered by any successful initiation of a conciliation procedure, or whether additional conditions must be met. This problem was signalled in the first legal question submitted to the expanded panel of the Supreme Court for resolution, as the case law has taken different views on the subject. The court indicated that in this context, it is particularly important to consider the debtor’s conduct and determine whether it gives the claimant any grounds to assume that a settlement may be reached. The disadvantage of such an admission is that it indirectly allows the debtor to influence whether a summons to attempt a settlement will interrupt the running of the limitations period of the claim.

The second legal question concerns the stage of the procedure when it could be determined whether the summons to attempt a settlement was made only to interrupt the limitations period. Such a finding could lead to the conclusion that the limitations period continued to run uninterrupted. However, doubts arise whether such an assessment should take place during the conciliation procedure or only at a later stage of consideration of the claim. It is also uncertain whether, if such an assessment were not made at all in the conciliation proceedings, it could be made later in the proceeding on the merits.

The rules for conciliation proceedings do not provide for examination by the court of the claimant’s actual purpose in initiating such proceedings, or admission of evidence on this point. However, examination of the claimant’s motivation only at the stage of the proceeding on the merits would generate a great risk of a finding after the fact that the claim is time-barred. This would create legal uncertainty, unfavourable for the claimant, on whether its actions are effective and whether it enjoys any legal protection at all due to interruption of the limitations period.

There is a chance that a resolution by the expanded panel of the Supreme Court will soon resolve these doubts. A proposed amendment of the Civil Code, according to which only the first summons to attempt a settlement, and only the first initiation of mediation, would interrupt the running of the limitations period, may also prove helpful.

Agata Jóźwiak, attorney-at-law, Dispute Resolution & Arbitration practice, Wardyński & Partners