Published in Yuridicheskaya Praktika (Legal
Practice), August 5, 2003, #31 (293), p. 10-
Aspects of Application of Period of Limitation in Promissory Note and Bill of
In recent years, a substantial growth of the bill of exchange and promissory note
circulation has been observed in Ukraine. To a considerable extent, this growth was fostered by
the expansion and normalization of the regulatory framework for negotiable instruments. In
particular, on 6 July 1999 Ukraine’s Parliament ratified the Geneva Conventions of 1930; these
include: (i) on abiding by the Uniform Law on Bills of Exchange and Promissory Notes
(hereinafter, the Uniform Law), (ii) for the Settlement of Certain Conflicts of Laws in
Connection with Bills of Exchange and Promissory Notes, and (iii) on the Stamp Laws in
Connection with Bills of Exchange and Promissory Notes. On 5 April 2001 the Law of Ukraine
on Circulation of Bills of Exchange and Promissory Notes in Ukraine was passed. The Securities
and Stock Market State Commission, the National Bank of Ukraine, and the Cabinet of Ministers
of Ukraine have been making more active efforts to regulate the bill of exchange and promissory
Not striving for a quick and comprehensive elucidation of the problems of t he bill of
exchange and promissory note circulation, herein I would like to address an important issue of
the period of limitation for the bills of exchange and promissory notes.
Types of Terms in Ukraine’s Civil Law
The theory of civil law considers a term as a certain period of time, an expiration of
which is linked by law with some legal consequences. According to Article 251 of the Civil Code
of Ukraine, dated 16 January 2003, which will take effect on 1 January 2004, “a term shall mean
a certain period of time, an expiration of which is linked with an action or an event of legal
Depending on the legal consequences or the nature of such consequences, the civil law
terms can be classified as:
(2) claim (or reclamation);
(3) the statute of limitations (or limitation of legal actions); and
A preclusive term is understood as a period of existence of a material right or obligation.
As soon as the preclusive term expires, such right or obligation terminates (is barred) and cannot
It should be noted that Ukrainian legislation does not define the “preclusive term.” This
concept was developed in the theory of civil law to apply to a large group of specific terms
because expiration of these terms results in termination (cessation) of the existence of certain
material right. Thus, for example, according to Article 194 of the effective Civil Code of Ukraine
(hereinafter, the Civil Code), the term of surety expires should the creditor fail to make a claim
against the surety within 3 months of maturity of obligation. If, on the other hand, the term of
maturity is not specified or is defined by the time of claim, then, in the absence of other
agreements, the surety’s obligation terminates upon expiration of 1 year from the time when the
surety agreement was entered. Preclusive terms are, in fact, sanctions for undue execution of, or
failure to execute, rights terminating the civil right itself.
Periods of Limitation in the Bill of Exchange and Promissory Note Law
One of many peculiarities of the bill of exchange and promissory note law is special
periods of limitation applicable exclusively in matters arising from the claim to settle a bill/note.
Thus, in case of failure to receive the payment, the bill/noteholder can enforce it through court.
This right is restricted by time limits, which, should they be missed, deprive the bill/noteholder
from the right to receive satisfaction on the bill/note. The period of time established by
legislation for actions to judicially protect the material right of a person arising out of a bill/note
is referred to as the period of limitation for a bill/note.
The Uniform Law introduced by the Geneva Convention of 1930 (hereinafter, the Geneva
Convention), which is Annex I thereto, stipulates 3 types of the period of limitation for actions
arising out of a bill/note. These periods are established by Article 70 of the Uniform Law.
Firstly, actions arising out of a bill of exchange against the acceptor are barred after 3
years reckoned from the date of maturity. It should be taken into account that this period is
applied both with respect to the claim of the billholder and with respect to the claims presented
against the acceptor of a bill of exchange by the drawer, endorsers, givers of aval and other
persons. The same rule is applied in cases of actions against the maker of a promissory note
because, according to Article 78 of the Uniform Law, the maker of a promissory note is bound in
the same manner as an acceptor of a bill of exchange. A three- year period commences on the day
of maturity as per the terms of the bill of exchange, whether the bill was protested or not.
Secondly, actions by the holder against the endorsers and the drawers of a bill of
exchange are barred after 1 year from the date of a protest drawn up within proper time or from
the date of maturity where there is a stipulation retour sans frais.
Thirdly, actions by endorsers against each other and against the drawer are barred after 6
months reckoned from the day when the endorser took up and paid the bill or from the day when
he himself was sued.
According to Article 34 of the Uniform Law, a bill of exchange (or a promissory note)
payable “at sight”, must be presented for payment within a year of its date. The holder of a bill of
exchange (or a promissory note) payable at a specified date or after the specified time from its
date or presentment, must present the bill of exchange (or the promissory note) for payment
either on the day when it is to be paid or within the next two business da ys.
Often, while establishing a payment term, drawers prescribe that a bill of exchange may
not be presented for payment before a named date (“on presentment but not earlier than…
[date]”). In such a case, the period for presentment begins from the specif ied date.
According to Article 77 of the Uniform Law, the provisions relating to bills of exchange
apply to promissory notes, including the provisions on the time of payment (Articles 33 to 37 of
the Uniform Law), so far as they are not inconsistent with the nature of these instruments. This
raises a question regarding legal consequences of delaying beyond the term for presentment of
the bill for payment. It is not uncommon that an organization, which holds a bill, having delayed
beyond the term for its presentment for payment considers that it has lost its right to claim
against the payer as the bill has turned into a “void” paper.
Article 53 of the Uniform Law stipulates that after the expiration of the limits of time
fixed for the presentment of a bill of exchange drawn “at sight,” the holder loses his rights of
recourse against the endorsers, against the drawer and against the other parties liable, with the
exception of the acceptor. Unfortunately, courts often refuse to support the claims on these
grounds. This, however, is not right and fails to take into account other Uniform Law provisions.
As to a promissory note, the giver as the principal debtor continues to be liable in any
case. In case of non-presentment within the established period of a promissory note drawn “at
sight” (or for another period), the holder loses his rights against all liable parties, with the
exception of the giver. The right of recourse against the latter is preserved for the entire period of
limitation, i.e., 3 years from the date of maturity (Article 70 of the Uniform Law). Therefore,
only the expiration of 3 years after maturity bars the very right to claim for settlement of a bill.
According to Article 44 of the Uniform Law, protest of a bill payable “at sight” must be
made within the limit of time fixed for presentment of bills of exchange for acceptance, i.e.,
within 1 year. Protest for non-payment of a bill of exchange payable on a fixed day or at a fixed
time after the date or presentment must be made on one of the two b usiness days following the
day on which the bill is payable.
Non-observance of the time limits for presentment of the bill for payment and non-
protesting entails a number of unfavorable consequences for the billholder. Thus, having delayed
beyond the term fixed for presenting the bill for payment, the holder losses the right of recourse
against other parties of bill- related matters and, inter alia, against the endorsers, who are
“secondary” debtors. Therefore, should the payer as the principal debtor be unable to pay on the
bill (and this takes place quite often), the billholder has no choice and has to deal with this debtor
The billholder, in his turn, losses his right of recourse against endorsers and other liable
parties, with the exception of drawer and aval giver, in case of missing the term for protest for
non-acceptance or non-payment (Article 53 of the Uniform Law).
Nature of the Period of Limitation
In the author’s opinion, the period of limitation to recourse against a debtor arising from a
bill of exchange or a promissory note differ from the statute of limitations under in Chapter 5 of
the Civil Code, and they are not regulated expressly by provisions of said Chapter. The periods
of limitation contemplated by Article 70 of the Uniform Law are preclusive terms rather than the
statute of limitations.
The most important consequence of such nature of the period of limitation for bills and
notes is that they are not subject to provisions of Article 80 of the Civil Code, which stipulate a
possibility to restore the missed statute of limitations. Thus, the period of limitation for bills and
notes cannot be restored should it be missed.
Should the billholder, endorser, drawer, or aval giver delay beyond the period of
limitation, he losses any bill-related rights against those parties, the time limits for recourse
against whom have expired. These rights cannot be restored, whether the reasons for delaying
beyond the period of limitation are justifiable or not.
Indeed, unlike the preclusive term, the term of limitation of actions is a period for
protection of the violated right. Upon its expiration, the person whose right has been violated is
deprived of the possibility to enforce in court his right, but the violated right itself remains. This
is the difference between the term of limitation of actions and the preclusive term; the expiration
of the latter entails the loss of the material right itself.
As a rule, another essential difference between the preclusive term and the statute of
limitations is that the latter can be subject to rules of suspension and interruption, while these
rules are not applicable to the preclusive term.
However, preclusive period of limitation pertaining to bills and notes feature some
specifics. Article 71 of the Uniform Law contemplates a possibility for interruption of the period
of limitation for the bills/notes. It should be noted that not only interruption but also suspension
of the period of limitation for the bills and notes is allowed under the Geneva Convention
(Article 17, Annex II).
At the same time, neither the Uniform Law nor the Geneva Convention stipulate concrete
cases, where the period of limitation can be interrupted or suspended in respect to the bills or
notes. Article 17 in Annex II to the Geneva Convention provides that “it is for the legislation of
each of the High Contracting Parties to determine the causes of interruption or suspension of
limitation in the case of actions… which come before its courts.”
This obviously implies that Ukraine’s legislation on the bills of exchange and promissory
notes must contain a list of, and conditions for, application of the causes of interruption and
suspension of the period of limitation for the bills and notes, i.e. it should contain relevant
special provisions pertaining specifically to the bills and notes. However, there are no such rules
in Ukrainian law.
This raises the question, whether the possibility of interruption or suspension of the
period of limitation for the bills and notes is hypothetical in Ukraine and relevant provisions of
the Uniform Law and the Geneva Convention do not work in this country? This viewpoint may
be worth attention but the author would rather support another concept, namely the concept of
limited application of the Civil Code provisions regarding suspension and interruption of the
term of limitation of actions to the bills of exchange and promissory notes by analogy of law.
The legislative base for the application of the analogy of law in this case can be found in
Article 11 of the Code of Civil Procedure of Ukraine, according to which “in the absence of a
law to regulate disputed relationships, the court shall apply the law regulating similar
relationships and, in the absence of such law, the court shall judge from the basic tenets and t he
contents of Ukraine’s legislation.” In the author’s opinion, the cases of interruption and
suspension of the period of limitation for the bills and notes must be regulated by provisions of
Chapter 5 of the Civil Code insofar as they do not contradict Uk raine’s legislation on the bills of
exchange and promissory notes.
Thus, for the time until Ukraine’s legislator passes the needed special provisions
regarding the period of limitation for the bills and notes, Articles 78 and 79 of the Civil Code on
suspension and interruption of the statute of limitations must be applied by analogy. According
to Article 78 of the Civil Code, the statute of limitations is suspended:
(1) if a legal action was prevented by an extraordinary and unavertable in current
terms event (force- majeure);
(2) under authority of suspended execution of liabilities (moratorium) established by
Ukrainian legislation; or
(3) if the plaintiff or defendant are in the Armed Forces of Ukraine under martial law.
Article 79 of the Civil Code establishes that the statute of limitations can be interrupted
by bringing a suit as established by law, provided that this suit was not left without
The mandatory feature of the statute of limitations, which actually draws the line between
the statute of limitations and the preclusive period of limitation, is the possibility to restore the
statute, should it be defaulted for a justifiable reason (Article 80 of the Civil Code). The
possibility for restoration of the statute of limitations stems from the fact t hat the material right
itself does not disappear as a result of delaying beyond the statute, but its judicial protection
becomes practically impossible.
Since neither the Uniform Law nor the Geneva Convention contemplates the restoration
of the period of limitation for the bills and notes, and the wording of Article 70 of the Uniform
Law explicitly points to cessation of the material right pertaining to the bill of exchange
(“actions … are barred”), the institute of restoration of the statute of limitations does not apply
to the period of limitation for the bills or notes.
Implicitly, this viewpoint is supported by the Information Letter # 01-8/314 of the
Supreme Court of Arbitration of Ukraine (hereinafter, the SCAU) of 17 August 1998 (with
amendments), according to which the billholder who failed to receive payment is allowed to
collect the payment judicially within the period of limitation (attention: not the statute of
limitations) established by the Uniform Law, namely 3 years from the maturity day regardless of
a protest of the bill.
Example from Practice
Recently, a dispute between Damen Shipyards Okean OJSC (hereinafter, Okean) and
Konvers Invest IFC (hereinafter, KI) has received a broad publicity in the mass media ( Beating
by Note on Investment Image by Pavlo Beba, Uryadoviy Courier, 2003, p.7; Meter for Investor:
Peculiarities of National Business by Olga Semashko, Ukraine and the World Today, 2003, # 26,
p. 3). The dispute is with respect to 17 promissory notes totaling $4,465,426, which were dra wn
by Okean Shipyard OJSC (legal predecessor of Okean) at 30% interest p. a.
On 9 October 1997, Okean Shipyard OJSC drew the above- mentioned notes by order of
Ukragroprompostach LLC, with the maturity “at sight, but not earlier than 22 March 1998.”
On 3 January 1998, Ukragroprompostach LLC notified Okean Shipyard OJSC about
transferring the notes to KI. This way, KI became the holder of said securities.
On 10 March 1999, Okean Shipyard OJSC received a notice of a private notary from the
Mykolaiv City Notarial District that 16 of the above- mentioned notes were presented for
payment on 11 March 1999. As it follows from Article 34 of the Regulation on Bills of
Exchange and Promissory Notes ratified by Resolution # 104/1341 of the Central Executive
Committee of the USSR and the Council of People’s Commissars of the USSR dated 7 August
1937 (hereinafter, the Regulation), which was effective in Ukraine at the time of drawing and
presenting the notes for payment, the notes were presented for payment on time, i.e. within 1
year reckoning from the fixed date for presentment for payment of a promissory note payable “at
sight, but not earlier than… (the specified date).”
According to Article II of the Geneva Convention, which, to remind, was ratified by
Ukraine on 6 July 1999 and became effective for Ukraine on 6 January 2000, the Geneva
Convention “shall not apply to bills of exchange and promissory notes already issued at the time
of the coming into force of the present Convention.” Thus, only provisions of the Regulation
shall apply to the afore- mentioned notes (which actually does not change the matter, as the
Regulation appears, with slight exceptions, to be the verbatim translation of the Uniform Law).
Taking into account Article 73 of the Regulation, providing that the terms — both
established by law and fixed in the bill/note — do not include the day when the period begins,
one can conclude that the period of limitation for these notes began on 12 March 1999. With
regard to the note, which was not presented for payment, one should recognize that its period of
limitation began on 23 March 1999, i.e., 1 year after the expiry of the term established for
presentment of this note for payment (22 March 1998).
On 12 March 1999, the notary drew up a protest of the notes for non-payment. In
accordance with Article 70 of the Regulation and the above- mentioned SCAU Information
Letter, this event does not affect the period of limitation for the notes — both those presented for
payment and that non-presented.
The author omits information on several lawsuits arising from Okean’s actions, which
followed (the lawsuits on cancellation of the execution writs to collect on the notes and on
declaring the notes invalid). Decisions in these lawsuits were given both to the plaintiff and
defendants and their main results included the termination of execution proceedings to collect on
the notes from Okean and declaration of the notes valid by the SCAU based on formal grounds.
One more important point of the above- mentioned lawsuits is that the plaintiff was
always Okean, i.e., the drawer. KI has never applied its right to take legal action to collect on the
notes — the presented ones and non-presented one— from Okean. Hence, according to Article
79 of the Civil Code, there is no interruption of the period of limitation for these notes with
respect to KI.
Thus, reasoning from Articles 70 and 78 of the Regulation, the author concludes that (1)
the period of limitation for the presented notes expired on 12 March 2002, i.e. in 3 years
reckoning from 12 March 1999, which is the next day after the day when the notes were
presented for payment (maturity date); (2) the period of limitation for the non-presented note
expired on 23 March 2002, i.e. in 3 years reckoning from 23 March 1999, which is the next day
after the last day when the non-presented note could have been presented for payment (the last
possible maturity date). For the reason of expiry of the period of limitation, KI has lost all the
rights to claim against Okean, including the right to claim for collection on the above- mentioned
notes. According to Article 70 of the Regulation, now these rights are barred, i.e. non-existing in
the material sense. This is a vivid example of insufficient knowledge of the provisions of the bill
of exchange and promissory note legislation, which protect the rights of a bill/noteholder.
According to Okean, a private notary of the Dnepropetrovsk City Notarial District made
execution writs with respect to 2 notes, by which proposed to collect from Okean to the benefit
of KI the outstanding amounts of these notes with interest, penalties, and costs of making
execution writs. Currently, Okean contests validity of these execution writs in the Kirovsky
Local Court of Dnepropetrovsk City.
Since the issue of uniform understanding of the period of limitation on bills of exchange
and promissory notes in Ukrainian law is very important, the author will try to follow the track
of the litigation and inform the legal community on developments in this interesting case.
Vadim Samoylenko is a partner with Shevchenko Didkovskiy & Partners, attorneys and
counselors-at-law in Kiev,
tel: (044) 230-6000, fax: (044) 230-6001, e-mail: email@example.com