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October 2020: deadline for claiming debts from 2015

| News | Litigation

By means of Law 42/2015 of 5 October on the reform of Law 1/2000 of 7 January on Civil Procedure, the legislator significantly reduced the limitation period provided for in Article 1964 of the Civil Code

Any democratic judicial system is based on two basic principles: the first, that of material justice, which informs and directs the law about its ultimate objective, which is none other than the scope of the truth and the attribution of appropriate legal consequences to it; the second, that of legal security, which warns the judge that not everything is valid in order to achieve this material justice, given that the application of the law is also subject to predetermined rules whose failure to comply is sanctioned with the nullity of the agreed resolution. 

Although there are many institutions that operate on the basis of the principle of legal certainty (the principle of non-retroactivity, the principle of res judicata, and many others), the so-called "extinctive prescription" plays a fundamental role in the field of commercial and professional relations. By means of the prescription, the holders of legal actions are warned that their claims have a lifespan to be asserted, after which they will no longer be able to find legal protection. As has been pointed out by the doctrine, the point is to avoid the existence of an eternal sword of Damocles that remains eternally hanging over legal relations, so that actions are prescribed for their non-exercise because it is not fair that legal relations are perennially threatened either.

The limitation periods for the various actions provided for by our positive law are very different, regulating our system from a short period of 6 months for the exercise of exchange actions by the endorsers, to an extensive period of 30 years for real estate actions. Many have pointed out that, in view of this disparity in time limits, our legal system must evolve, in line with the legal systems of other European states, towards a certain unification of the limitation periods in matters of civil liability and the configuration of uniform criteria for calculating their time. This is a practical necessity that is necessary to the already mentioned principle of legal certainty.

In this connection, the legislator decided in 2015 to introduce a major reform of the statute of limitations, which, although much more cautious than that proposed by the Standing Committee on Codification, is of great significance for legal transactions.

In effect, through Law 42/2015, of 5 October, reforming Law 1/2000, of 7 January, on Civil Procedure, the legislator notably reduced the limitation period contemplated in Article 1964 of the CC, the regulatory precept of limitation par excellence, given that it applies to all those personal actions that do not have a specific time limit and whose wording has remained intact since the approval of the Civil Code in 1889. The limitation period for such actions, which was considered appropriate more than a century ago, had become obsolete in our modern and technological society today.

Thus, and without prejudice to the time limits laid down in special laws (e.g. trademark rights, transport, etc.), most actions for the payment of sums due for non-payment of debts, actions for the termination of the contract for failure to comply with obligations assumed and claims for damages arising from a breach of contract are subject to the time limit of art. 1964 of the CC, among others.

The reduction in the limitation period of Article 1964 of the Spanish Civil Code has been significant, insofar as all these actions have gone from being subject to a limitation period of 15 years to being limited to a maximum period of 5 years. The legislator had assumed that the long period of 15 years meant giving creditors an excessively broad margin of action, which was not in line with the other periods provided for other personal actions and which, taking into account the multitude of legal relationships affected by this precept, meant a change in legal traffic that was sufficiently important to require a modification that balanced the interests of creditors in the preservation of their claims, with the right of debtors to have a reasonable maximum period established for the exercise of actions against them.   

This five-year limitation period entered into force on 6 October 2015 and is fully applicable to all legal relationships arising after that date. However, actions that could already be brought before the entry into force of the law maintain the limitation period of 15 years but with a deadline for the exercise of all such actions set at 7 October 2020. This means, as the Supreme Court recently pointed out in its ruling 29/2020 of 20 January, that "legal relations started between 7 October 2005 and 7 October 2015 will be subject to the statute of limitations on 7 October 2020".

Thus, on October 7, 2020, the first of the reforms that the legislator had in its agenda regarding prescription will be definitively consolidated and possibly followed by others in the coming years.

Time does not play in favour of all those creditors who still have credit claims generated between October 2005 and October 2015 and who have not initiated legal proceedings to claim the debt, nor have they interrupted the period through reliable claims. It is time to proceed to review the files of unpaid credits and to put the matters in the hands of firms that have an adequate structure to be able to efficiently address the wave of claims that will follow in the next eight months, at the risk of seeing their credit rights on such debts definitively foiled.

You can read the full article in El Economista.

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