PERSONAL SUBROGATION OR NOVATIO AND STATUTE OF LIMITATIONS.

Application of general and seemingly well-established institutes of civil law is bound to provoke a controversy at some point in time. This is often so when the old institutes are to be applied to relationships which have been regulated by subsequently enacted special legislation. Lack of coordination and harmonization between the general and the special rules might result in departure from the generally accepted principle and bring about controversial practice, eroding legal certainty. One of such cases arose after Serbia (i.e. FR Yugoslavia) reached agreements with so-called Paris and London creditors' clubs and took over debts of the domestic banks, the very debts it has guaranteed for. Pursuant to the general rules of the contract law this brought about subrogation of the State into the claims of the foreign banks vis-a-vis the banks. Pursuant to the legislation enacted subsequently and dealing specifically with this matter, the amount of the assumed debts was converted into shares of the State in the banks it has shielded from their creditors. Furthermore, given that the banks have ended in bankruptcy, the State has attempted to establish a direct legal link to the end users of the credits that the banks drew from the foreign creditors. When these claims were brought before the courts, the debtors invoked statute of limitations which has time-barred the original claims. Commercial courts were - on most ocassions, and almost uniformly - quick to reject such objection, offering widely different, and even contradictory, explanations: that payment to the foreign creditors resulted in a completely new obligation, that the obligation in question stems from unjust enrichment and is thus not time-barred, that the payment resulted in novatio, that the run of the original period of the statute of limitations was interrupted and paused, that the obligation in question stems from the statute itself. The discrepancy among the explanations shows that the uniformity of the final holdings (operative parts of the judgments) is deceptive and that the courts are at a loss when having to apply a wellknown and established institute of statute of limitations. This paper offers detailed analysis of the case law and critique of the reasonings offered by the courts. At the same time, the paper offers reasons why a somewhat smaller number of decisions of the Supreme Court of Cassation arrived to a correct conslusion that the claims were time-barred, since the change of creditors cannot affect the run of the statute of limitations. [ABSTRACT FROM AUTHOR]