RussianLegal Establishes a New Case Law Concerning the Legal Effect of Debt Recognition after Expiry of the Limitation Period

RussianLegal acted for a Hungarian agrichemical holding company in a dispute over a large outstanding payment for fertilisers delivered to an agricultural entity. The applicable period of limitation expired in September 2016 before we got our first instructions from the client, and the debtor issued a letter recognising the debt in November 2016.

The respondent believed its debt recognition letter would have no legal effect as it was issued after the limitation period had already expired and the legislative innovation introduced by Article 206 of the Civil Code of the Russian Federation to be effective from 1 June 2015, which said that the recognition of a debt after the applicable limitation period has expired would start a new limitation period, would be inapplicable to the case as the amendment entered into force after the agreement had been entered into.

While both the trial and appellate courts agreed with the debtor’s arguments, the Commercial Court of the Moscow Circuit took our side by holding that if the limitation period had not expired by the date of the amendment, any post-amendment debt recognition would result in the beginning of a new limitation period.