Recognition of a Loan as Time-Barred (Statute of Limitations)

Under the conditions of a transitional democracy, as independent Georgia is still learning the methods and means of operating in a market economy, new types of relations are emerging that were previously unknown to the country. In a context where the banking sector, in its classical sense, is only about 30 years old, loans, the financial problems arising from loan agreements, and the consequent exclusion from civil circulation have become a challenge for society. In this article, I will try to explain as clearly as possible, using the example of a specific case, how or in what form an existing loan can be recognized as time-barred (subject to the statute of limitations), and what path a person has to go through for this;

First and foremost, when we talk about a loan and the statute of limitations, the issue of the statute of limitations must be divided into two parts. The first is when a 3-year statute of limitations is established for contractual claims according to paragraph 1 of Article 128.1 of the Civil Code ("The statute of limitations for contractual claims is three years"). This means the following: for example, Giorgi transferred an amount as a loan to Guram on January 1, 2017. The deadline for the repayment of the loan was set, for example, for January 1, 2018. When does the statute of limitations for the claim arise? Not on January 1, 2018, but rather January 1, 2018 + 3 years, meaning on January 2, 2021, the claim is already time-barred;

There is a second statute of limitations, which relates to periodically executable obligations. For these, a 3-year statute of limitations is established for each individual claim (according to Article 128.2 of the Civil Code, the statute of limitations for claims arising from periodically executable obligations is three years). This means something simple. For example: Giorgi transferred an amount as a loan to Guram on January 1, 2017. The contract specified that on the 1st of every month, an amount X, say 100 GEL, was to be paid, and overall, the loan amount was to be fully covered by January 1, 2018. Guram paid, for example, 100 GEL on February 1, 2017, but subsequently did not make any further payments. Giorgi went to court in July 2020 requesting the imposition of the loan amount starting from March 2017. In such a case, his claim from March to June 2017 (inclusive) is time-barred, but it is not time-barred from July 2017 to January 1, 2018 (inclusive) (there is and will be separate problematic issues here regarding whether the termination of the contract occurred retroactively, how the limitation on the part of the loan should be determined, etc.). But this is a simpler example. The statute of limitations is the right of the defendant, not the obligation of the judge. If a person does not invoke the statute of limitations, the court has no right to rule on it (capitalism demands sacrifices from justice), but that is a different matter entirely;

Consequently, one of my clients contacted me asking for help because, due to a loan, he was on the so-called "black list" and wanted to get off this list. In order not to be on the "black list," and/or if you are on it but need it to be indicated that the claim against you is time-barred, legal proceedings are mandatory. Legal proceedings mean that the client submits a demand for the court to recognize the loan taken by them as time-barred. This is a classic declaratory lawsuit. A declaratory lawsuit means that "a certain fact is established by the power of the court" (e.g., establishing paternity). This is more of an exceptional proceeding in court; therefore, it is necessary to substantiate what result the recognition of the loan as time-barred will yield for the person. In our case, we submitted a claim and demanded: 

The lawsuit was accepted into proceedings, and we were tasked with serving this lawsuit to the defendant—meaning the owner of the claim—and submitting proof of service to the court. To our surprise, the defendant agreed to recognize the loan as time-barred

Despite our request for the court to make a decision without an oral hearing, a court session was still scheduled. After the court session, the court made a decision satisfying our demand, namely:
"To recognize as time-barred the right of claim of LLC '--------' against ---------, arising from the bank credit agreement concluded on November --------, -------- between ------------ and JSC 'Bank of Georgia', for the principal debt amount of 2762.53 GEL" 

The said decision entered into legal force. It is noteworthy that a writ of execution is not issued for such decisions because "there is nothing to execute." Accordingly, we submitted the legally binding decision on the recognition of the claim as time-barred to JSC "Credit Information Bureau Creditinfo Georgia" and requested that the recognition of the loan as time-barred be reflected in the client's so-called report. After a two-day correspondence, JSC "Credit Information Bureau Creditinfo Georgia" refused to register the decision, indicating: "A document (for example, a copy of the statement of claim) must be presented from which we can determine since when the claim has been time-barred. If a power of attorney is not presented in accordance with our sample, we will not be able to provide you with an extract; however, we will act in accordance with the presented court decision"

This position goes far beyond legal reality because "a private company has no right to enter into a discussion of a legally binding court decision; it must execute it." A second issue is to what extent JSC "Credit Information Bureau Creditinfo Georgia" has an obligation to register this. (Furthermore, I already had several decisions of the exact same nature registered with the said company). The answer to this could be as follows: The defendant, JSC "Credit Information Bureau Creditinfo Georgia," is a credit information bureau registered by the National Bank of Georgia, whose main activity is collecting credit information and providing it to credit or other types of organizations. By providing important data during the decision-making process, the company supplies banks, leasing companies, and other organizations whose activities involve issuing loans or supplying services or goods on consignment. The activities of the Bureau are regulated by the Organic Law of Georgia "On the National Bank of Georgia" and the decrees of the President of the National Bank of Georgia. The Bureau's products and services fully comply with the requirements of Georgian legislation.

The defendant represents a sort of public registry in the field of loans. The credit history of any person is held/stored by the defendant; accordingly, it was obliged to reflect the loan as time-barred in the plaintiff's credit history. Based on the above, I had to file a second lawsuit on behalf of the client and set the demand as follows:

The lawsuit was accepted into proceedings, and we were tasked with serving it to the defendant—now JSC "Credit Information Bureau Creditinfo Georgia"—and submitting proof of service to the court. The most important thing in all this was that I was interested in both the position of the court and the position of JSC "Credit Information Bureau Creditinfo Georgia" itself, because a "sort of public registry" required judicial clarification, including from the court, etc. Within one working day of serving the lawsuit, I received the following response from JSC "Credit Information Bureau Creditinfo Georgia": "The change is recorded in the database, the expiration date of the statute of limitations is 30.11.2022. Best regards"

In this way, the recognition of the loan as time-barred was achieved in the case of this specific client. Regarding the legal issues, in one of its cases, the Supreme Court explained that "According to paragraph 1 of Article 128 of the Civil Code, the Chamber explained that the statute of limitations implies the time during which an authorized person can realize or protect their right. The specificity of the institution of the statute of limitations lies in the fact that after the expiration of the established period, the right of claim objectively exists, but it is unenforceable; meaning, the realization of this right in full depends on the will of the addressee of the claim. Article 130 of the Civil Code links the commencement of the statute of limitations to the moment the claim arises, and the moment the claim arises is considered the time when the person learned or should have learned of the violation of the right."

The statute of limitations is a purely legal issue; that is, the law offers the limitation period to a party, and whether this party uses it or not is up to them, because a person decides their own fate. Additionally, in one of its cases, the Supreme Court explained that the purpose of the statute of limitations is the protection of the debtor and their release from the difficulties of proof caused by the passage of time. The temporal restriction of the right to claim in a judicial proceeding is conditioned by: 1. Simplifying the establishment of factual circumstances and the adoption of a substantiated decision by the court; 2. Protecting the stability of civil circulation; 3. The failure to take measures to protect a violated right over a long period of time generally indicates that the victim is either not sufficiently interested in exercising their right or is not convinced of the validity of the claim; 4. The statute of limitations for lawsuits promotes the performance of obligations assumed by a transaction, stimulates the activity of participants in civil circulation in terms of realizing their own rights, and also strengthens mutual control over the performance of obligations (Commentary on the Civil Code of Georgia, Book I, Tbilisi, 2017; Commentary on Article 128, Paragraph 3, p. 721).