Statute of limitations in Latvian Civil and Commercial Law: Last moment to submit a claim against Latvian company
Prescription period in civil rights and commercial rights as well is period of time when the claims have to be established. After this period creditors have no more rights, even through the court, to ask to perform the obligation.
In this research will be discussed main things regarding prescription period in three Baltic States – Latvia, Lithuania and Estonia. Even if there are a lot of similarities regarding prescription in Roman – German law type countries (almost all EU countries - except Great Britain and Ireland), however there are also important differences, which have to be kept in mind, in situation, if debtor is a company which is registered in Latvia, Lithuania or Estonia. In this research main focus will be on prescription periods regarding commercial law.
Before focusing on specific terms, more important is – how to count the term?
A prescriptive period shall begin to run with the day when the claim is established such that an action may be brought immediately against a debtor who has not performed his or her duty, even though the debtor may not yet have refused to perform it, nor received a reminder from the creditor.
Example – according to invoice debtor has to pay until 01.01.2014. That mean – term starts from 01.01.2014.
However there are also situations when term starts from conclusion agreement, for example – claim regarding price reduction because of deficiencies of goods.
A reminder to the debtor shall interrupt the prescriptive period.
Example – according to invoice debtor has to pay until 01.01.2014. Creditor sent a reminder to debtor on 01.02.2014. That means – terms start from 01.02.2014.
The use of a right by bringing an action in court or turning to an arbitral tribunal shall interrupt the prescriptive period. If a plaintiff does not continue the matter initiated by his or her action, the prescriptive period shall begin again from the day when the matter was to have proceeded, i.e., from the last date set for and missed by the plaintiff.
Example - according to invoice debtor has to pay until 01.01.2014. Creditor bring an action in court on 01.02.2014, creditor does not pay the court fee till 01.03.2014. That means – term starts from 01.03.2014.
A prescriptive period shall be interrupted if during the time of its running the debtor in some manner acknowledges the claim of the creditor.
Example - according to invoice debtor has to pay until 01.01.2014. 0n 01.02.2014 debtor pays half of invoice. That means – term starts from 01.02.2014.
As it is now known how to count the term, it is possible to focus on terms.
The general rule in civil rights is that all obligation rights shall terminate if the party entitled to them does not use them within ten year period.
In the same time there are many exceptions from the general rule.
According to Latvian Commercial Law - claims arising from a commercial transaction are subjected to a limitation period of three years, unless other limitation period is specified by the law.
Meaning of “commercial transactions” is - lawful transactions of a merchant, which are connected with commercial activities. It is important to notice that „commercial transactions” can be also when only one of the parties is merchant and the other party is physical person and prescription period is three years, insofar as it is not otherwise provided for in regulatory enactments in the field of protection of consumer rights or in other laws.
From January 1, 2010 entered in force part D of Latvian Commercial Law– Commercial Transactions. According to new regulation – commercial transactions prescription period is three years. Before new regulation also commercial transaction prescription period was ten years (according to general rule of Civil Law), but when Commercial Law part D entered in force, it changed the term as lex specialis.
It can be concluded that prescription period for claims regarding commercial transactions, which are concluded till 2010 ends in January 1, 2013.
Specific situations and therefore also specific prescription periods.
Despite of that individual merchant is not very popular type of merchants, because individual merchant is liable for his or her obligations with the whole of his or her property, few professions in Latvia have to be individual merchants – such as attorneys, person who is resident in the Republic of Latvia and which receives royalties (copyright fee), notary ect.
A claim against an individual merchant, which arises from the performance of his or her commercial activities, has a statute of limitations period of three years after his or her deletion from the Commercial Register if the claim is not subject to a shorter statute of limitations period.
Example – according to invoice individual merchant has to pay to creditor until 01.01.2014. Individual merchant is deleted from the Commercial Register on 01.02.2014. Last day to submit a claim or reminder is – 01.02.2017.
If the term or the conditions of the performance of an obligation by an individual merchant comes into effect after the individual merchant has been deleted from the Commercial Register, the statute of limitation period for the claims of creditors shall commence with the time of the coming into effect of the term for or the conditions of the performance of an obligation.
Example – Individual merchant is deleted from Commercial Register on 01.01.2014, according to invoice individual merchant has to pay to creditor until 01.02.2014. Last day to submit a claim is – 01.02.2017.
A commercial agent is a merchant who has been authorised permanently to conclude transactions with third parties in the name and to the benefit of another person (principal) or also to prepare transactions for concluding. Commercial agent has to be merchant as a individual merchant or as a legal person. Employee cannot be commercial agent. Commercial agent act on the basis of Power of Attorney.
The statute of limitations for claims arising from a commercial agency contract shall be four years, counting from the end of that calendar year in which they arose.
Example – principal has claim against commercial agent from 01.01.2014. Four year period starts from 01.01.2015. End of prescription period is 01.01.2019.
Example - principal has claim against commercial agent from 31.12.2014. Four year period starts from 01.01.2015. End of prescription period is 01.01.2019.
A commercial agent after the cancellation of a commercial agency contract may request relevant indemnity from the principal and compensation for losses caused due to the termination of a commercial agency contract, especially to compensation for unearned expenses and investments which the commercial agent has performed upon the proposal of a principal in fulfilling the commercial agency contract.
The parties may not agree regarding waiver of the rights specified in this Section to request the indemnity or compensation for losses prior to the expiry of the commercial agency contract. The claim for indemnity or compensation for losses is subject to a limitation period of one year after the expiry of the commercial agency contract.
Example – commercial agent contract expiry 01.01.2014. End of prescription period is 01.01.2015.
Prohibition of Competition of members
A member of a partnership may not, without the consent of the rest of the members, conclude transactions in the sector of commercial activities of the partnership or be a member with full liability in another partnership which performs the same commercial activities.
In this situation period for claims shall be three months from the day when the rest of the members of the partnership discovered about the violation against the prohibition of competition, but not later than within five years from the day of the commission of the violation.
Claims against a Member of a Partnership
Claims arising from the obligations of a partnership against a member of the partnership shall have a statute of limitations period of three years after the termination of the partnership, if the claim against the partnership is not subject to a shorter statute of limitations period. The statute of limitations period shall commence from the day that the termination of a partnership is entered in the Commercial Register.
Example – partnership has claim against a member from 01.01.2014. Partnership is deleted from the Commercial register 01.01.2015. End of prescription period is 01.02.2018.
If the terms of fulfilment or conditions of the obligations of a partnership have come into effect after the termination of a partnership has been entered in the Commercial Register, the statute of limitations period of a claim of a creditor shall commence at the time of the coming into effect of the terms of fulfilment or conditions of the obligations.
Example – Partnership is deleted from the Commercial register 01.01.2014. Partnership has claim against a member from 01.02.2014. Partnership is deleted from the Commercial register 01.01.2015. End of prescription period is 01.02.2017.
Liability of Founders
Founders shall be solidarily liable for losses, incurred by the company and third parties, which occurred during the founding of the company as a result of the founders having acted maliciously or negligently.
A person, who has facilitated the malicious or negligent actions of the founders or has collaborated in them, shall be solidarily liable together with the guilty founders if he or she knew or should have known about the malicious or negligent character of such actions.
The statute of limitation period shall be five years from the date of the entering of the company in the Commercial Register.