Are you aware that as a creditor, you have a deadline to claim what is owed to you? Don’t let time slip away—claim what is rightfully yours before it’s too late! We will explore the steps and deadlines of debt collection procedures to protect your essential financial rights.
The statute of limitations is a fundamental legal principle that establishes limited timeframes to assert a right or initiate legal action. It applies to claims of all types, including commercial, civil, and tax debts. Once this period expires, the creditor loses the right to pursue legal action to recover the debt.
The main reasons for the statute of limitations include the need to ensure legal certainty by setting clear deadlines for disputes, preserving evidence before it becomes unavailable, and encouraging prompt action to avoid prolonged uncertainty. It also protects against abusive claims and promotes social peace by terminating disputes after a certain period. Finally, the statute of limitations contributes to economic efficiency and fair judicial management by preventing the courts from being overwhelmed with old disputes.
When the statute of limitations is interrupted, it means that the limitation period is suspended or restarted, allowing the legal action to continue beyond the initially established deadline. Limitation periods are primarily governed by national legislation, leading to differences from country to country: for example, generally, the limitation period for bringing a claim for a commercial debt is 5 years in France, 3 years in Germany, 5 years in Spain, 6 years in UK and 10 years in Italy. In this article, we will focus on the limitation periods in Italy, methods to interrupt them, and actions possible in the case of a time-barred debt.
The Statute of Limitations in Italy: When Italian Law Applies
a) Limitation Periods
Limitation periods vary depending on the nature of the claim. Article 2946 of the Italian Civil Code stipulates that, unless otherwise provided by law, the period for exercising the right to recover a claim is ten years (e.g., invoices for one-time purchases of goods or services). The limitation period is automatic and begins to run from the day the right can be claimed. In the calculation, all calendar days, whether holidays or not, are considered without exception. For example, suppose an invoice was due on January 1, 2020 (the last due date for payment indicated in the invoice received by the debtor). If the creditor does not receive payment by this date, the ten-year limitation period starts running from January 1, 2020. Thus, the creditor will have until January 1, 2030, to claim payment of this invoice through legal means.
However, there are several exceptions that shorten the limitation period to five years for certain types of claims. For example, debts payable within five years include condominium debts and rents, periodic payments (Article 2948 of the Civil Code, e.g., telephone bills, TV subscriptions), claims arising from employment relationships such as wages, and claims against the state and public administrations, such as local taxes and social security contributions.
Invoices for electricity, water, and gas, on the other hand, have a limitation period of two years.
It is important to note that an agreement between the parties modifying the limitation periods is not valid, and it is also not possible to waive the limitation period established by law in the terms of the initial contract; such a clause would be void.
b) How to Interrupt the Limitations periods?
In Italy, the limitations periods can be interrupted, and the period restarts from zero. The main ways to interrupt the limitations period are:
- acknowledgment of the debt by the debtor, or
- proof of a formal written request of payment received by the debtor such as a demand letter by the creditor, and/or
- starting a mediation proceeding in Italy or other ADR proceedings,
- initiating legal proceedings such as obtaining an order for payment.
In each case, the limitation period is reset and begins to run again from the date of the interruptive act. Thus, after obtaining a payment order from the judge, the creditor typically has 10 years to enforce the order.
Concerning the content of default notices to the debtor, in its recent ruling of March 10, 2022, the Italian Court of Cassation (Cassazione Civile, VI-2, n. 7835) affirmed and emphasized that th interruptive act of the limitation period does not need to mention the claimed amount or the intention of the creditor to enforce judicially its rights. A simple written request for payment identifying the debtor is sufficient.
In the case examine by the Italian Supreme Court, a lawyer had obtained a judicial payment order for his fees for defending a hospital business. The hospital contested this order, invoking the ten-year limitation of the claim. The court, after reviewing the case, annulled the payment order, rejecting the claim on the grounds of limitation, asserting that the lawyer had not performed valid interruptive acts, limiting himself to requesting payment. The lawyer appealed, and the Italian Supreme Court supported his request, explaining that na simple payment reminder sent to the debtor, even without specifying the amount or formally demanding it, will be considered sufficient to achieve the goal of interrupting the statute of limitations.
c) What Actions Can Be Taken When a Claim Becomes Time-Barred?
When a claim becomes time-barred, it means the legal deadline for claiming payment has expired. In this case, it is generally impossible to initiate legal action to recover the debt. The only possibility is to explore amicable solutions with the debtor, such as payment arrangements or debt acknowledgment agreements.
It is also advisable to consult a lawyer specialized in debt collection. The lawyer can provide an accurate assessment of the situation, identify available legal options, and, if possible, perform valid interruptive acts and/or initiate legal proceedings before the claim is definitively lost due to the statute of limitations.
When Foreign Law Comes into Play: When Italian Law Does Not Apply
When the parties to a contract have chosen a foreign law to govern their relationship or when a dispute arises in an international context, the rules of limitation are determined by the law chosen in the contract or by the conflict of laws rules of the country where the dispute is adjudicated.
Practical Example
Suppose an Italian company (Company A) and a German company (Company B) enter into a contract stipulating that the contract will be governed by German law. If a dispute concerning this contract is brought before an Italian court, the following rules apply:
Contract Law: German law governs the contract. In Germany, the limitation period for contractual claims is generally 3 years, unlike the 10 years in Italy.
If the dispute is judged in Italy, the Italian court will apply the conflict of laws rules to determine if German law should apply for the limitation period. According to Regulation (EC) No 593/2008 (Rome I) on the law applicable to contractual obligations in the EU, the law chosen by the parties (in this case, German law) should govern matters related to the contract, including limitation periods.
Procedure: The Italian court will apply German law for the limitation periods. Thus, although Italian limitation periods are longer, the court will adhere to the limitation periods stipulated by German law as provided in the contract.
The statute of limitations plays a crucial role in debt collection procedures in Italy and in all civil law countries. It strikes a balance between protecting creditors’ rights and ensuring legal certainty for debtors, while encouraging proactive debt management. Recent judicial developments, such as the Italian Court of Cassation’s ruling, show flexibility in interrupting the limitation period, providing creditors with additional means to protect their interests.
It is essential for creditors to closely monitor limitation periods and, in the case of international contracts, determine the applicable law considering the limitation periods set by that law. The importance of seeking specialized legal advice cannot be overstated, both to navigate the complexities of procedures and to maximize recovery chances.
Marie Vanswevelt
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