In Finland, several exemptions have been provided to employers, employees and businesses in order to ease the heavy financial burden and to combat the many health-related challenges and financial consequences arising from the spread of the coronavirus. Several significant landlord organizations have made announcements on rent reductions or postponements and new financial assistance models have been created for businesses. Working together for a common goal is the prevailing mood, which surely constitutes a remedy to us all for overcoming these hard times. Still, there will come a time when loans become due for payment and claims must be filed. Therefore, we should continue to keep track of our own economy and retain our rights, also in the role as a creditor.

The previous extensive depression in the early 1990s gave an impetus to many new laws and major legislative reforms. The aim was to create a framework for better management of indebt-edness and its consequences in financial institutions, businesses as well as for individuals.

For example, the regulation related to the expiry of debts and guarantee liability was renewed. The objective was to harmonize the divergence of expiration periods and, more generally, to shorten the time during which the receivables must be collected. Among other things, one of the reasons behind the reforms was that as a result of the depression, a very large number of indi-viduals had become indebted in a situation where the interests on bank loans could normally be 18%. Another typical situation was that individuals had secured high-interest corporate loans and pledged their private property whose value no longer covered the amount of debts. For these reasons, the main focus of the reforms was on the protection of private debtors and guarantors, though the legislation does not separate between different groups of debtors within business activities. Therefore, listed companies as debtors and banks as guarantors are also protected and private parties as injured parties, i.e. as creditors, do not enjoy a more protected position than other creditors.

Later on, the Finnish Supreme Court has established some judicial precedents concerning the application of the laws in practise. Outlines of expiration of debts as well as preservation of a right to action in civil claims will be presented in this article in the light of these precedents.

How to act as a creditor

Receivables expire within the general three-year period, within a shorter period as agreed upon to the disadvantage of the creditor or within a specific expiration period specified in law. The specific expiration period may be shorter or longer than three years. In addition, claims can ex-pire due to the neglect of the reclamation obligation or passivity.

1. Remind the debtor of an unpaid receivable

The debtor must be reminded no later than three years from the agreed due date of the invoice or, for example, from the due date of the rent instalment. The reminder must be renewed within less than every three years. Otherwise the receivable expires and can no longer be collected from the debtor. However, an expired receivable can still be used as set-off for one’s own debts.

2. Note the damages

Some receivables, such as compensations for damages, do not have a predetermined due date. In cases of a breach of contract, the general three-year expiration period for damages begins on the date on which the purchaser has discovered or should have discovered the flaw or defect in the object of sale.

The expiration period for non-contractual damages, on the other hand, begins to run from the date on which the injured party has become or should have become aware of the damage and the person liable for it. However, the expiration period for damages shall be interrupted for the first time before ten years has passed from when the breach of contract or the event giving rise to the damage occurred, even if the information of the damage and the person liable for it have been received less than three years ago. Environmental damages and personal injuries constitute exceptions to which the 10-year deadline does not apply. Damages caused by a criminal offence form another exception and  compensation for such damage can generally be claimed for as long as it is possible to seek imposition of a penalty for the act.

It may occasionally be hard to determine when such sufficient information of the damage and the party liable for it, which triggers the beginning of the expiration period, has been received. The Supreme Court has during the past few years adopted quite a firm line on the rise of aware-ness. The injured party should therefore react as soon as possible when there is even a small reason to do so instead of waiting for the liability of the party who has caused the damage to be resolved in another process or until all reports on damages are completed.

Examples of the legal praxis of the Supreme Court (KKO):

• KKO 2013:63: An insurance company had compensated a person who had been involved in a traffic accident, first for damage to property and later on also for personal injuries. The in-surance company had presented a claim towards the road operator requiring compensation for the payments made relating to the damage to property but the claim regarding the person-al injuries was not presented until five years after the traffic accident. The Supreme Court stated that the insurance company, as a professional insurer and after having already made some compensation payments, should have been aware also of the personal injuries more than three years before the action was brought although the personal injuries were not com-pletely clear at that time. The claim presented for the damage to property had not interrupted the expiration period with regards to the personal injuries.

• KKO 2016:11: The injured party’s claim for damages caused by a competition infringement begun to expire when the Finnish Competition Authority had given its penalty proposal to the Finnish Market Court.

This is a strict statement as penalty proposals are not always accepted  or they are on-ly accepted regarding some of the named defendants. Nevertheless, the injured party should have made its claims already on the basis of the penalty proposal. After this case, the expiration regulations regarding damages caused by a competition in-fringement have been amended and damages caused by a competition infringement after the new regulations took effect (on 26 December 2016) do not expire as long as the competition infringement case is pending.

• KKO 2016:28: The expiration period for a damages debt between the state and anindividual was considered to have begun when the Court of Justice of the European Union issued a rul-ing on 19 March 2009, according to which Finland had breached the prohibition of discrimi-natory taxation. Up until that the citizen had had a right to rely on that the tax which was in line with the legal praxis of the Finnish Supreme Administrative Court had been levied cor-rectly in 2004. The citizen had submitted the claim in 2011 and therefore the claim had not expired.

In the relationship between the state and the individual protection was given to the individual.

• KKO 2017:3: W had unjustifiably held the mortgage instruments of the property owned by M in his possession. Because of this, M was unable to complete the sale of the property which had already been negotiated. The expiration period for M’s claim began when M had become aware of the alleged damage and of W’s actions resulting in the arising of the al-leged damage and of the reasons for W not having a lien on the property. It was irrelevant for the beginning of the expiration period, that the existence of the lien had not yet been set-tled in an enforcement dispute.

The injured party should have claimed compensation without delay and should not have waited for the court’s decision on whether W had a right to possess the mort-gage instruments or not.

• KKO 2017:84: Foreign shipping route fees had been collected on different basis than do-mestic ones, which constituted a breach of EU law. The expiration period of the claims of the shipping companies concerning the compensation for overcharged fees was ruled to have begun when they had received information of the decision under which the fees had originally been collected.

The expiration period began from the decision under which the fees had originally been collected even though the injured parties did not necessarily have actual knowledge of the illegality of the fees.

• KKO 2018:11: The city had purchased and resold a real estate from a company operating in the rubber industry. During the construction work on the property, rubber waste was found in the soil. The soil was cleaned up at the expense of the city because the original seller had refused to do so. Consequently, the city claimed compensation for the clean-up costs from the seller and its parent company. It was ruled that the expiration period for the city’s claim begun when the representative of the city had been present at the on-site inspection of the property which was conducted because of the rubber waste found in the soil. According to the Supreme Court, that was the moment when the representative of the city had received the sufficient information of the damage suffered and the party liable for it.

The expiration period began immediately after the injured party could have become aware of the rubber waste and the party most likely liable for it, even though the ex-act amount of damages in money was unclear at that point. It is not always necessary to report the exact amount of damages when interrupting the expiration period and because of this, the results of more detailed reports should not be waited for before submitting the claim.

3. Give notice of defects without delay

It is not recommendable to count merely on the fact that there is still time remaining of the expi-ration period according to law. If an incorrect invoice or a defective product has been delivered to a purchaser or if there is a defect in a purchased property or apartment or damage has other-wise been caused, the purchaser and the injured party should point out the defect or the damage, i.e. give a notice of defects, within a reasonable period of time after becoming aware of the de-fect or the damage, at the risk of losing the right to a repair or compensation long before the limitation period has expired.

Examples of the legal praxis of the Supreme Court (KKO):

• KKO 2016:69: Defects in quality had been noticed in a purchased real estate. The buyers had soon after noticing the defects informed the sellers about them and reserved a right to present claims later. The buyers did not present the claim until a year had passed from the moment when the defects were first noticed. The Supreme Court ruled that the buyers would have been able to find out the exact extent of the damages faster than almost a year after the first reclamation. The buyers had therefore lost their right to invoke the defects.

• KKO 2018:38: The buyer of the real estate had informed the seller on time of the defects in the real estate and the claims based on them. A 10-year expiration period was applied to the liability of the real estate transaction. After the reclamation, four years had passed before the buyer filed a lawsuit. Because of the passivity, the buyer had lost the right to rescind the purchase already before the 10-year limitation period for filing a suit had expired.

4. Note the agreed deadlines

It is very common that the contracting parties agree on deadlines within which the notice of de-fects must be given, or within which the claims must be presented to the contracting party. These deadlines should be kept in mind as time limits agreed upon in contractual provisions may re-place the time limits set out in law.

5. Interrupt the expiration period correctly

The general expiration periods set out in the Act on the Statute of Limitations of Debt (728/2003) can be interrupted informally. However, the interruption is recommended to be made in a way that can be proven, for example by an acknowledgement of receipt. However, so called special expiration periods can only be interrupted by filing a lawsuit. Such include, for example, damages caused by competition infringements, claims based on decisions on compen-sation made by the insurer, claims based on the Employment Contracts Act and the Working Hours Act as well as claims based on the Limited Liability Companies Act and the Auditing Act. Expiration periods which must be interrupted by filing a lawsuit are often either shorter or longer than the general three-year expiration period.

If the debtor has been declared bankrupt, the deadline for filing a claim is set out by the admin-istrator.

Conclusions

Do not let your claim expire by accident; send a letter, an email or a message that can be proven or, when necessary, interrupt the expiration period by filing a lawsuit. Remind all liable parties and renew the reminder if needed.

The magnitude of the consequences of the depression in the 1990s was partly a result of high-interest loans and the realization of currency risks. Now the interest rates have remained very low and therefore a similar major effect on solvency due to interest levels is not expected. At the moment there is a new health-related threat at hand also affecting work and possibly leading towards a new depression. Compared to the depression of the 1990s it is likely, however, that the objectives of the legislative reforms mentioned at the beginning of this article materialize in a more controlled manner.

(This article addresses civil receivables only. Debts under public law, such as taxes and other official fees expire for good when five years have passed from the end of the year when the payment was levied.)