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UKRAINE-TYUMEN v. UKRAINE - 22603/02 [2007] ECHR 968 (22 November 2007)
URL: http://www.bailii.org/eu/cases/ECHR/2007/968.html
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[2007] ECHR 968
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FIFTH
SECTION
CASE OF
UKRAINE-TYUMEN v. UKRAINE
(Application
no. 22603/02)
JUDGMENT
(merits)
STRASBOURG
22
November 2007
This
judgment will become final in the circumstances set out in Article 44
§ 2 of the Convention. It may be subject to editorial
revision.
In the case of Ukraine-Tyumen v. Ukraine,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Mr P. Lorenzen, President,
Mr K.
Jungwiert,
Mr V. Butkevych,
Mrs M. Tsatsa-Nikolovska,
Mr R.
Maruste,
Mr J. Borrego Borrego,
Mr M. Villiger, judges,
and
Mrs C. Westerdiek, Section Registrar,
Having
deliberated in private on 23 October 2007,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
The
case originated in an application (no. 22603/02) against Ukraine
lodged with the Court under Article 34 of the Convention for the
Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by the Ukraine-Tyumen Joint Stock Company (“the
applicant”) on 23 July 2001.
The
applicant was represented by Mr V. Bondarchuk, its president, and
Messrs M. Onischuk and E. Ugrinchuk, lawyers practising in Kyiv. The
Ukrainian Government (“the Government”) were represented
by their Agent, Mr Y. Zaytsev.
On
13 March 2006 the Court decided to give notice of the
application to the Government. Under the provisions of Article 29 §
3 of the Convention, it decided to examine the merits of the
application at the same time as its admissibility.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
The
applicant is a Ukrainian joint venture based in Kyiv, with legal
personality under Ukrainian law.
In
June 1995 the Governor of the Tyumen Region of the Russian Federation
submitted a proposal to the President of Ukraine to co-fund a joint
venture for strengthening and further improvement of trade links
between Ukraine and the Tyumen Region. The Governor also suggested
that Ukraine should transfer title to a building in Kyiv to the
future company, so that it could be used as its head office.
In
September 1995 the applicant company was founded by six companies,
including the Ukrresursy State Enterprise.
On
20 August 1996 the applicant's articles of association were amended,
the number of co-founders having increased to seven entities,
including the Ukrresursy State Enterprise and the State Property Fund
of Ukraine (“the Fund”). The Fund was stated to be acting
on behalf of the Ukranaftoprodukt State Enterprise
(“Ukranaftoprodukt”). Each founder was declared to hold
14.28% of the applicant's share capital. While six companies were to
pay equal amounts of money for their shares (USD 71,542),
the Fund undertook to transfer to the applicant company a title to
the building valued at USD 71,542,
and belonging, as was stated in the articles of association, to
Ukranaftoprodukt.
On
30 August 1996 Ukranaftoprodukt, acting on the Fund's
instructions, transferred title to an administrative building in Kyiv
to the applicant. Ukranaftoprodukt continued to use the building as
its premises.
According
to the applicant's amended articles of association, it was
established mainly for the purposes of obtaining profit for the
shareholders and for the creation of an infrastructure for the
cooperation between Ukrainian and Tyumen companies pursuant to
intergovernmental decisions aiming at improving effectiveness of
business links and implementation of joint programmes, such as the
sale of oil, gas, wood, agricultural products; legal advice;
organisation of exhibitions; other commercial activities necessary
for achieving the goals of the company. The applicant company enjoyed
all the rights of a separate legal entity. The applicant's
shareholders were entitled to take part in its management, to receive
a part of its profit, to be informed about its activities etc. The
property of the applicant company consisted of the objects and money
transferred to its share capital by the shareholders, as well as the
funds received by the applicant from other sources. The shareholders
did not enjoy separate rights over the objects transferred to the
applicant as their contributions.
In
October 1998 the Kyiv City State Administration (“the City
Administration”) instituted proceedings in the Higher
Arbitration Court of Ukraine against the Fund, Ukrnaftoprodukt and
the applicant company, seeking recovery of title to the building,
claiming that it owned the building and alleging that the title to
the latter had been transferred to the applicant ultra vires.
On
29 December 1998 the court invalidated the transfer of 30 August 1996
and ordered Ukrnaftoprodukt to give the building back to the City
Administration. The court found that that the building belonged to
the Kyiv City Administration and that the Ukrnaftoprodukt had not
been entitled to transfer it to the applicant.
Ukranaftoprodukt
lodged a request for review of the decision of 29 December 1998
with the panel of the Higher Arbitration Court for the review of
judgments, rulings and resolutions (the “Review Panel”).
On
11 March 1999 the Review Panel quashed the judgment of 29 December
1998 and rejected the claim of the City Administration. The panel
held that the claim had been lodged out of time and that there was no
evidence that the City Administration was the lawful owner of the
building.
On
24 March 2000 the Presidium of the Higher Arbitration Court rejected
the request for supervisory review (the “protest”)
of the resolution of 11 March 1999, lodged by the President of that
court, as unsubstantiated.
On
24 January 2001 the Prosecutor General of Ukraine,
following the City Administration's request, lodged a protest with
the Plenary Higher Arbitration Court (the “Plenary Court”),
seeking supervisory review proceedings in the case. On 15 February
2001 the Plenary Court, in the presence of the representatives of the
General Prosecutor's office, allowed the protest, quashed the
resolutions of 11 March 1999 and 24 March 2000, and upheld the
judgment of 29 December 1998. In its decision, the court summarised
the Prosecutor General's arguments and found them substantiated. No
other reasons were given for its decision. The parties were not
invited to participate in the hearing before the Plenary Court. The
applicant's comments on the protest of the Prosecutor General
were not examined by the Plenary Court.
According
to the applicant, on 2 November 2001 its articles of
association were amended to the effect that the Ukrainian authorities
were no longer a shareholder.
The
Government contended that the State remained one of the founders of
the applicant company and, hence, the owner of 28.56%
of its share capital.
II. RELEVANT DOMESTIC LAW
A. Economic Associations (“Companies”) Act
of 19 September 1991 (as worded at the material time)
The
relevant provisions of the Act read as follows:
Article 12. Property of the company
“A company shall be the owner of:
[i] the property which its founders ...
transferred to it;
[ii] the objects which it produced...;
[iii] the profit which it received...”
Article 13. Contributions of founders and
participants of a company
“Participants and founders of a company may
transfer to it as their contribution buildings ..., money ...
The contribution expressed in karbovatsi
shall constitute the founder's and participant's share in the
[company's] statutory fund.”
B. Arbitration Courts Act of 4 June 1991 (repealed as
of 1 June 2002)
The
relevant provisions of the Act read as follows:
Article 1. Administration of justice in economic
cases
“In accordance with the Constitution of Ukraine,
the arbitration courts shall have jurisdiction over economic cases.
The arbitration court is an independent body with
jurisdiction over all economic disputes between entities, public and
other bodies, and over litigation arising out of insolvency.”
Article 11. Composition of the Higher Arbitration
Court of Ukraine
“The Higher Arbitration Court shall be composed
of the President, the First Deputy President, the President's
deputies, and the judges and [it] shall sit as:
the Plenary Higher Arbitration Court;
the Presidium of the Higher Arbitration Court;
the panels for the consideration of disputes and for the
review of judgments, rulings, resolutions.”
C. Code of Arbitration Procedure of 6 November 1991
(before the changes introduced on 21 June 2001)
The
relevant provisions of the Code of Arbitration Procedure provided:
Article 14. Jurisdiction of the Higher Arbitration
Court
“The Higher Arbitration Court shall consider
cases:
1) in which one of the parties is ... the Kyiv City
State Administration...”
Article 91. Grounds for supervisory review of a
judgment, ruling or resolution
“The lawfulness and reasoning of a judgment,
ruling or resolution of an arbitration tribunal ... may be reviewed
under the supervisory procedure upon the party's request or following
a protest by a prosecutor or his deputy, in accordance with
this Code and other laws of Ukraine.
The party's request for review of a judgment ... shall
be examined by ... the panel of the Higher Arbitration Court for the
review of judgments, rulings and resolutions.
The following persons are empowered to lodge a protest:
The Prosecutor General and his deputies...”
Article 92. Arbitration court's right to review the
lawfulness of a judgment, ruling, resolution under the supervisory
procedure on its own initiative
“The arbitration court shall be entitled to review
under the supervisory procedure the lawfulness and reasoning of a
judgment, ruling, resolution on its own initiative...”
Article 95. Powers of the panel of the Higher
Arbitration Court on supervisory review of a judgment, ruling,
resolution
“... The panel ... shall review under the
supervisory procedure:
1) a judgment and ruling concerning a dispute which was
adjudicated by the Higher Arbitration Court...”
Article 96. Supervisory review of a judgment, ruling,
resolution by the panel of the Higher Arbitration Court
“A judgment, ruling, resolution shall be reviewed
by a panel of the President of the Higher Arbitration Court or his
deputy and a judge of the Higher Arbitration Court. If they do not
agree on the outcome of the review, the President of the Higher
Arbitration Court or his deputy may report to the Presidium of the
Higher Arbitration Court who decides the matter...
A judgment, ruling, resolution shall be reviewed by the
President of the Higher Arbitration Court or his deputy and two
judges of the panel, if the application of law or assessment of
evidence in the case is difficult. In such a case, the decision shall
be adopted by a majority of votes.
A judgment or ruling delivered by the Deputy President
of the Higher Arbitration Court or delivered in the hearing in which
he presided shall be reviewed by the President of the Higher
Arbitration Court and two judges of the panel. In such a case, the
resolution shall be adopted by a majority of votes.
A judgment or ruling delivered by the President of the
Higher Arbitration Court or in the hearing in which he presided shall
be reviewed by the Presidium of the Higher Arbitration Court.
If necessary, the parties may be invited to give their
explanations at the panel's hearing.”
Article 97. Right to lodge with the Presidium of the
Higher Arbitration Court a request for supervisory review
“The President of the Higher Arbitration Court,
the Prosecutor General of Ukraine or his deputies have a right to
lodge with the Presidium of the Higher Arbitration Court a protest
against the resolution delivered by the panel of the Higher
Arbitration Court for economic disputes.
A party to the proceedings has a right to lodge with the
Presidium of the Higher Arbitration Court an application for
supervisory review of the judgment or ruling delivered by the
President of the Higher Arbitration Court in the hearing in which he
presided...”
Article 99. Right to lodge with the Plenary Higher
Arbitration Court a request for supervisory review of the resolution
of the Presidium of the Higher Arbitration Court concerning an
economic dispute
“The President of the Higher Arbitration Court,
the Prosecutor General of Ukraine have a right to lodge with the
Plenary Higher Arbitration Court a protest against the
resolution delivered by the Presidium of the Higher Arbitration
Court.
Following its deliberations, the Plenary Higher
Arbitration Court shall adopt a resolution...”
Article 100. Lodging of an application for
supervisory review of a judgment, ruling, resolution, and [lodging
of] a protest by a prosecutor or his deputy
“An application for supervisory review ... shall
be lodged with the arbitration court which adjudicated the case. If
the supervisory review is to be carried out by the Higher Arbitration
Court, the application, together with the case-file, shall be
submitted by the relevant arbitration court to the Higher Arbitration
Court within five days following the receipt of the application.
The protest ... shall be lodged with the
arbitration court competent to review the judgment...
Copies of the application or protest shall be
sent to the parties...
The enforcement proceedings shall not be suspended if an
application or a protest is lodged, save in the cases where
the judgment ... concerns the transfer of money and the forced taking
of property...”
Article 102. Deadline for lodging of an application
for supervisory review of a judgment, ruling, resolution, and [for
lodging of] a protest by a prosecutor
“An application ... and a protest must be
lodged within two months of the date of the judgment...”
Article 103. Observations in reply to an application
for supervisory review of a judgment, ruling, resolution, and [in
reply to] a protest of a prosecutor
“Upon the receipt of a copy of the application for
supervisory review ... or of a protest, a party shall send to
the arbitration court, other parties ... [its] observations [in
reply].
...
The absence of the [parties'] observations ... shall not
prevent [a court] from carrying out the review.”
Article 104. Information about the date and time of
the supervisory review of a judgment, ruling, resolution. Time-limits
of the review [procedure].
“The parties may participate in [the proceedings
on] the review... The prosecutor ... shall take part in [the
proceedings on] the review, which were initiated upon [his] protest.
The non-appearance of the parties or the prosecutor ... shall not
prevent [the court] from carrying out the review...
The supervisory review ... shall be completed within two
months of the receipt of an application or protest...
A judgment, ruling, resolution of the arbitration court
may be reviewed under the supervisory procedure no later than within
one year after their delivery.”
Article 106. Powers of the arbitration court,
reviewing a judgment, ruling, resolution
“... [T]he arbitration court has power:
[i] to leave a judgment, ruling, resolution
without changes;
[ii] to change a judgment, ruling,
resolution;
[iii] to quash a judgment, ruling,
resolution, and to adopt a new judgment, remit a case for a fresh
consideration, discontinue the proceedings, or leave a case without
consideration.
A judgment, ruling, resolution ... shall be reviewed as
a whole, irrespective of the grounds for an application for
supervisory review or a protest.
An arbitration court reviewing a judgment, ruling,
resolution under the supervisory procedure shall have all the powers
of an arbitration court considering an economic dispute.
The supervisory review of a judgment, ruling, resolution
by the Higher Arbitration Court shall be final, save when a party is
outside the territory of Ukraine and there is an agreement between
the relevant States for a different procedure of review.”
Article 106. Grounds for changing or quashing of a
judgment, ruling, resolution
“...
1) incomplete examination of the
circumstances relevant to a case;
2) lack of proof of the relevant
circumstances established by a court;
3) lack of conformity of the conclusions [of
a court] ... with the circumstances of a case;
4) violation or incorrect application of
substantive or procedural law...”
Article 115. Finality of a judgment, ruling,
resolution and their binding force
“A judgment, ruling, resolution of an arbitration
court shall be final and binding on the day of their delivery...”
THE LAW
I. The Government's
preliminary objections
A. As to the locus standi of the applicant
company
The
Government submitted that the applicant company did not have the
capacity to apply to the Court under Article 34 of the Convention,
since the State held 28.56% of its share
capital through the Ukrresursy State Enterprise
and the State Property Fund. The Government also stated that the
applicant company had been established pursuant to an agreement
between the Ukrainian and Russian high governmental officials in
order to create an infrastructure for the cooperation between
the Ukrainian and Tyumen companies and to implement the
intergovernmental decisions aiming at improving effectiveness of the
cooperation between the businesses of two
countries. Thus, the applicant had to be classified, for the
purposes of Article 34 of the Convention, as a governmental
organisation. The Government further argued
that in the case Kosarevskaya and Others v. Ukraine
(nos. 29459/03, 4935/04 and 26996/04, 6 December 2005)
the Court had found the State
responsible for the debts of the company, in which it had held 32.67%
of the share capital. The Government suggested that the same approach
should be taken in the present case, as moreover the dispute at hand
had concerned a building which belonged to the State.
The
applicant company disagreed, stating that according to
Ukrainian law it was a private company,
whose aim was to receive profit through business operations and to
divide it among its shareholders. The applicant submitted that it
acted according to its articles of association which were of an
ordinary private-law nature, that the State's share did not allow it
to control the applicant, and that it did not perform any public-law
functions. The mere fact that originally there were two State
entities among its founders could not deprive the applicant of its
right to have recourse to the Court under Article 34 of the
Convention.
In
its further submissions, the applicant stated that as of
2 November 2001 none of its shares belonged to the State.
In
reply, the Government contended that the State remained one of the
founders of the applicant company and, consequently, the owner of
28.56% of its share capital.
The
Court observes that whilst it is not contested that one of the
original founders of the applicant company was a State Enterprise,
and that the State was also responsible for the State Property Fund,
which became a co-founder of the company in August 1996, it is not
clear from the parties' submissions whether the State retained a
share in the applicant company from 2 November 2001
onwards. Nonetheless, the Court does not find
it necessary to determine that particular issue, as in any event it
considers that the applicant company has standing before the Court
for the following reasons.
The
Court recalls that a legal entity “claiming to be the victim of
a violation by one of the High Contracting Parties of the rights set
forth in the Convention and the Protocols thereto” may submit
an application to it, provided that it is a “non-governmental
organisation” within the meaning of Article 34 of the
Convention. The term “governmental organisation”, as
opposed to “non-governmental organisation”, includes
legal entities which participate in the exercise of governmental
powers or run a public service under Government control (see Radio
France and Others v. France (dec.), no. 53984/00, ECHR 2003-X).
When determining whether a particular entity falls into one of the
abovementioned categories, the Court has regard to its legal status,
the nature of the activity it carries out, the context in which it is
carried out, and the degree of the entity's independence from the
political authorities.
The Court observes that according to Ukrainian law and
its articles of association the applicant company enjoys
institutional autonomy; it is governed by company law and it is under
the control and management of its founders (see paragraphs 9 and 18
above). Even assuming that the State still owns around a third of the
applicant's share capital, no evidence has been submitted which could
indicate that the State is entitled to a greater role in managing the
company that the other shareholders. Moreover, there is nothing in
the case-file to suggest that the applicant company carried out
activities other than those which could be classified as business,
irrespective of the fact that some provisions of its articles of
association could be construed as to entrust the applicant with a
public-service mission, namely to implement “intergovernmental
decisions” in the field of business
cooperation.
The
Court accordingly concludes that the applicant company is a
“non-governmental organisation” within the meaning of
Article 34 of the Convention and that the Government's objection
should be dismissed.
B. As to the compliance with the six-month rule
The
Government pleaded non-compliance with the six-month rule. They
stated that the final decision in the applicant's case, within the
meaning of Article 35 § 1 of the Convention, was given by the
Higher Arbitration Court on 29 December 1998, i.e. more than six
months before the application was lodged with the Court. The
Government maintained that the subsequent review of this decision
could not be taken into account as it was effected in the course of
the extraordinary procedure. The applicant disagreed.
The
Court notes that on 11 March 1999 the Review Panel overruled the
judgment of 29 December 1998 and adopted a resolution favourable to
the applicant. The latter resolution was subsequently quashed by the
Plenary Court on 15 February 2001, which also reviewed the case on
the merits and upheld the judgment of 29 December 1998. The
applicant's complaints are essentially directed against the
resolution of the Plenary Court, which was delivered less than six
months before the applicant company lodged the present application
with the Court (23 July 2001). The Government have failed
to advance any argument as to why the Court should disregard that
decision (see, mutatis mutandis, Tregubenko v. Ukraine
(dec.), no. 61333/00, 21 October 2003). Accordingly, the Court
is not prevented by the six-month rule from considering the
application.
II. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF
THE CONVENTION
The
applicant company complained about the quashing of the resolution of
the Review Panel of 11 March 1999, stating that the latter had been
the final and binding decision given in its favour. It alleged that
the procedure before the Plenary Court had been incompatible with the
principles of legal certainty, equality of arms and a public hearing.
The applicant invoked Article 6 § 1 of the Convention which
provides, in so far as relevant, as follows:
“In the determination of his civil rights and
obligations ..., everyone is entitled to a fair and public hearing
... by an independent and impartial tribunal ...”
A. Admissibility
The Court finds that in the absence of the parties'
comments on the admissibility of the applicant's complaints under
Article 6 § 1 of the Convention, apart from those
discussed above (see paragraphs 21-30 above), these complaints raise
issues of fact and law under the Convention, the determination of
which requires an examination of the merits. It discerns no ground
for declaring them inadmissible.
B. Merits
In
their observations on the merits of this part of the application, the
Government stated that the applicant's rights under Article 6 § 1
of the Convention had not been infringed. In particular, they argued
that the Prosecutor General had acted on behalf of one of the parties
to the impugned proceedings, the Kyiv State Administration, when he
had lodged a protest with the Plenary Court. His intervention
to the proceedings was in the interests of the State and, thus,
lawful.
The
Government further argued that the applicant, which had first
benefited from the extraordinary review of the judgment favourable to
another party to the proceedings (see paragraph 13 above), was not
entitled to bring into question the compliance of the same procedure,
as a result of which it had finally lost the case, with the
Convention. The Government referred to the “clean hands”
doctrine in international law, according to which the responsibility
of a State is not engaged when the complainant himself has acted in
breach of the law, international or domestic.
The
applicant disagreed, stating that the review of its case by the
Review Panel had been a part of the ordinary court procedure for the
purposes of Article 6 § 1 of the Convention and
had not contravened the principle of legal certainty. In contrast,
the review of its case by the Plenary Court was an extraordinary
procedure which contravened Article 6 § 1 of the
Convention.
The
Court recalls that in its decision concerning the admissibility of an
application involving similar issues, it found that the procedure of
supervisory review of a first instance court's judgment by the Review
Panel, which existed before changes had been introduced to the Code
of Arbitration Procedure on 21 June 2001, did not run counter the
principle of legal certainty and that the applicant's recourse to
that procedure had been necessary for the purposes of exhaustion of
domestic remedies under Article 35 § 1 of the
Convention (see Sovtransavto Holding v. Ukraine
(dec.), no. 48553/99, 27 September 2001). In that case, the
Court noted that this procedure had been directly available to each
party to the case and that it had not depended on the discretionary
power of a State authority.
The
Court finds no ground to depart from the conclusions it reached, in a
different context, in the Sovtransavto case. It also notes
that according to Articles 97, 100, 102-104 of the Code of
Arbitration Procedure, as worded at the material time, the first
instance arbitration court's judgment could not be challenged before
the Review Panel indefinitely, but within a period prescribed by law,
namely, within two months following the adoption of the first
instance court's judgment; that the relevant procedural rules
provided for the communication of a party's or prosecutor's request
for review to another party and the latter's right to submit its
comments in reply; and that the Review Panel could reconsider the
first instance court's judgment only within a year from the date of
its adoption (see paragraph 20 above). Accordingly, the Court finds
that the resolution of the Review Panel of 11 March 1999 was the
“final decision” in the case, within the meaning of
Article 35 § 1 of the Convention, and the Court rejects the
Government's submission that the applicant company's application to
the Review Panel disqualified it from complaining about subsequent
events.
The
procedure of review of the case by the Plenary Court, however, was
distinct from that by the Review Panel. In particular, under Article
99 of the Code of Arbitration Procedure it was only the President of
the Higher Arbitration Court and the Prosecutor General who had power
to introduce a request for supervisory review of the case by the
Plenary Court (see paragraph 20 above). The exercise of those powers
was not subject to any time-limit and there was no obligation on the
Plenary Court to consult the parties before deciding on the
submissions of the President of the Higher Arbitration Court or the
Prosecutor General.
The
Court has already found in similar cases before it that the
supervisory review of final and binding judgments, which was not
directly accessible to parties, nor subject to any time-limit, nor
justified by substantial and compelling circumstances, was not
compatible with the principle of legal certainty that is one of the
fundamental aspects of the rule of law for the purposes of Article 6
§ 1 of the Convention (see, for instance, Ryabykh v.
Russia, no. 52854/99, § 52-58, ECHR
2003 IX, Sovtransavto Holding v. Ukraine, no. 48553/99,
§ 77, ECHR 2002 VII, and Agrotehservis v. Ukraine,
no. 62608/00, §§ 42-43, 5 July 2005).
In
the absence of any special factors which could justify the use of a
supervisory review in the applicant's case, the fact that the latter
procedure was used to set aside the resolution of the Review Panel of
11 March 1999, given in the applicant's favour, is sufficient to
enable the Court to rule that its “right to a court”
under Article 6 § 1 of the Convention was infringed.
The Court does not find it necessary to consider
separately whether the procedural guarantees of Article 6 § 1
of the Convention, in particular, equality of arms and public
hearing, were respected during the proceedings before the Plenary
Court.
There has accordingly been a violation of that
Article.
III. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
The applicant company further complained under
Article 1 of Protocol No. 1 that it had been
unlawfully deprived of its possessions as a result of the quashing of
the decision of the Review Panel of 11 March 1999. Article 1
of Protocol No. 1 reads as follows:
“Every natural or legal person is entitled to the
peaceful enjoyment of his possessions. No one shall be deprived of
his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of
international law.
The preceding provisions shall not, however, in any way
impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the
general interest or to secure the payment of taxes or other
contributions or penalties.”
The
applicant company submitted that it had been deprived of its building
unlawfully, alleging that such deprivation had been based on the
resolution of the Plenary Court of 15 February 2001 which had
contravened the principle of rule of law. It further submitted that
there had been no public interest which could have justified the
deprivation of its possessions.
The
Government did not contest that the impugned building had been the
applicant's property for the purposes of Article 1 of
Protocol No. 1 at a time when the domestic courts had ruled
otherwise. They argued that the applicant had been deprived of that
property lawfully and in the public interest. In particular, such
deprivation was envisaged by the final judgment and was necessary to
ensure the observance of the right of the Kyiv community to enjoy its
municipal property.
A. Admissibility
The Court notes that in the absence of the parties'
comments on the admissibility of this part of the application, other
than those discussed above (see paragraphs 21-30 above), it is not
manifestly ill-founded within the meaning of Article 35 § 3 of
the Convention. It further notes that it is not inadmissible on any
other grounds. It must therefore be declared admissible.
B. Merits
1. Whether there was an interference with the right of
property
Article
1 of Protocol No. 1 comprises three distinct rules: “the first
rule, set out in the first sentence of the first paragraph, is of a
general nature and enunciates the principle of the peaceful enjoyment
of property; the second rule, contained in the second sentence of the
first paragraph, covers deprivation of possessions and subjects it to
certain conditions; the third rule, stated in the second paragraph,
recognises that the Contracting States are entitled, among other
things, to control the use of property in accordance with the general
interest ... The three rules are not, however, 'distinct' in the
sense of being unconnected. The second and third rules are concerned
with particular instances of interference with the right to peaceful
enjoyment of property and should therefore be construed in the light
of the general principle enunciated in the first rule” (see,
for instance, Jahn and Others v. Germany [GC],
nos. 46720/99, 72203/01 and 72552/01, § 78,
ECHR 2005 ...).
The
Court notes that it is not disputed that the applicant company
suffered an interference with its right of property which amounted to
a “deprivation” of possessions within the meaning of the
second sentence of the first paragraph of Article 1 of Protocol No.
1. The Court must therefore examine whether the interference was
justified under that provision.
2. Justification for the interference with the right of
property
a. “Provided for by law”
The
Court reiterates that the first and most important requirement of
Article 1 of Protocol No. 1 is that any interference by a public
authority with the peaceful enjoyment of possessions should be
lawful: the second sentence of the first paragraph authorises a
deprivation of possessions only “subject to the conditions
provided for by law” and the second paragraph recognises that
the States have the right to control the use of property by enforcing
“laws”. Moreover, the rule of law, one of the fundamental
principles of a democratic society, is inherent in all the Articles
of the Convention (see Amuur v. France, judgment of 25 June
1996, Reports of Judgments and Decisions 1996-III, pp. 850-51,
§ 50; Former King of Greece and Others v. Greece [GC],
no. 25701/94, § 79, ECHR 2000-XII; and Malama v. Greece,
no. 43622/98, § 43, ECHR 2001-II).
The
Government argued that the interference had been lawful, since it had
been sanctioned by the court's final decision, while, according to
the applicant, that decision had been delivered in violation of the
principle of legal certainty and, thus, it could not have served as a
legitimate ground for the interference with the applicant's right to
property.
Although
the Court is generally not entitled to call into question the
decisions reached by the domestic courts and tribunals, it notes that
the principle of lawfulness requires the State to afford judicial
procedures that offer the necessary procedural guarantees and
therefore enable the domestic courts and tribunals to adjudicate
effectively and fairly any disputes between private persons (see
Sovtransavto, cited above, § 96).
However,
not every procedural shortcoming in a case will take an interference
with the right to possessions outside the scope of the “principle
of lawfulness”. In the present circumstances, the Court is not
required to take a position on this issue as the deprivation of
possessions was in any event not compatible with Article 1 of
Protocol No. 1 for the reasons set out below.
b. “In the public interest”
The
Court notes that the resolution of the Plenary Higher Arbitration
Court, by which the applicant company was deprived of the building,
was based on formal grounds, namely, that a State authority, the
State Property Fund, had transferred the building to the applicant
ultra vires, since it belonged to a local authority.
The
Court considers that the doctrine of ultra vires provides an
important safeguard against errors by the authorities acting beyond
the competence given to them under domestic law. The Court does not
dispute the purpose or usefulness of this doctrine which indeed
reflects the notion of the rule of law underlying much of the
Convention itself (see Stretch v. the United Kingdom,
no. 44277/98, § 38, 24 June 2003). Thus,
notwithstanding the applicant company's submissions to the contrary,
the Court is of the view that the taking of the applicant's property
by application of the doctrine of ultra vires was capable of
serving the public interest. The Court however must also verify
whether the principle of proportionality was respected in this case.
c. Proportionality of the interference
The
Court reiterates that an interference with the peaceful enjoyment of
possessions must strike a “fair balance” between the
demands of the general interest of the community and the requirements
of the protection of the individual's fundamental rights (see, among
other authorities, Sporrong and Lönnroth v. Sweden,
judgment of 23 September 1982, Series A no. 52, p. 26,
§ 69). The concern to achieve this balance is reflected in
the structure of Article 1 of Protocol No. 1 as a whole, including
therefore the second sentence, which is to be read in the light of
the general principle enunciated in the first sentence. In
particular, there must be a reasonable relationship of
proportionality between the means employed and the aim sought to be
realised by any measure depriving a person of his possessions (see
Pressos Compania Naviera S.A. and Others v. Belgium, judgment of
20 November 1995, Series A no. 332, p. 23, § 38).
In
determining whether this requirement is met, the Court recognises
that the State enjoys a wide margin of appreciation with regard both
to choosing how the measures are to be implements and to ascertaining
whether the consequences of implementation are justified in the
general interest for the purpose of achieving the object of the law
in question. Nevertheless, the Court cannot fail to exercise its
power of review and must determine whether the requisite balance was
maintained in a manner consonant with the applicant's right to “the
peaceful enjoyment of [its] possessions”, within the meaning of
the first sentence of Article 1 of Protocol No. 1 (see Zvolský
and Zvolská v. the Czech Republic, no. 46129/99,
§ 69, ECHR 2002 IX).
Compensation
terms under the relevant legislation are material to the assessment
whether the contested measure respects the requisite fair balance
and, notably, whether it imposes a disproportionate burden on the
applicants. In this connection, the Court has already found that the
taking of property without payment of an amount reasonably related to
its value will normally constitute a disproportionate interference
and a total lack of compensation can be considered justifiable under
Article 1 of Protocol No. 1 only in exceptional circumstances
(see Holy Monasteries (The) v. Greece, judgment of 9
December 1994, Series A no. 301 A, p. 35, § 71;
Former King of Greece, cited above, § 89; and Zvolský
and Zvolská, cited above, § 70).
Turning
to the circumstances of the present case, the Court notes that the
applicant company acquired the building as consideration for its
shares in good faith, without knowing that the State Property Fund
had no power to transfer it, and it has not been suggested that it
should have known. Even though Ukranaftoprodukt continued to use the
building, it formed part of the assets of the applicant company in
the same way as any other asset, and the company had, at the very
least, a legitimate expectation that it would be able to use the
building as part of its commercial operations.
The
effect of the decision to quash the transfer of the building from
Ukranaftoprodukt to the applicant company was thus to deprive the
latter of part of its initial capital, and hence of part of its
assets. There has been no suggestion that that it was open to the
applicant company to seek any form of compensation to make up for
that loss.
The
Court discerns no exceptional circumstances capable of justifying the
absence of compensation in the present case and finds that the
applicant company has thus had to bear an individual and excessive
burden which has upset the fair balance that should be maintained
between the demands of the public interest on the one hand and
protection of the right to the peaceful enjoyment of possessions on
the other.
There
has therefore been a violation of Article 1 of Protocol No. 1.
IV. APPLICATION OF ARTICLE 41 OF THE CONVENTION
Article 41 of the Convention provides:
“If the Court finds that there has been a
violation of the Convention or the Protocols thereto, and if the
internal law of the High Contracting Party concerned allows only
partial reparation to be made, the Court shall, if necessary, afford
just satisfaction to the injured party.”
A. Damage
The
applicant company submitted that it suffered some pecuniary and
non-pecuniary damage because of the violation of its Article 6 and
Article 1 of Protocol No. 1 rights. However, it did
not specify the amount of its claim. It further sought the return of
the building, of which it had been deprived, as a part of
compensation for the pecuniary damage it had suffered.
The
Government maintained that the applicant's claims had been
unsubstantiated and had to be rejected in their entirety.
The
Court notes that the applicant's claim for non-pecuniary damage is
unspecified and, therefore, rejects it as unsubstantiated.
The
Court further considers that the question of the application of
Article 41 in respect of the applicant's claim for pecuniary damage
is not ready for decision. It is therefore necessary to reserve the
matter, due regard being had to the possibility of an agreement
between the respondent Government and the applicant company (Rule 75
§ 1 of the Rules of Court).
B. Costs and expenses
The
applicant company did not specify its claim under this head. The
Court therefore makes no award.
FOR THESE REASONS, THE COURT UNANIMOUSLY
Declares the application admissible;
Holds that there has been a violation of Article
6 § 1 of the Convention;
Holds that there has been a violation of Article
1 of Protocol No. 1;
Holds that the question of the application of
Article 41 is not ready for decision in so far as the applicant has
claimed pecuniary damage and accordingly,
(a) reserves
the said question;
(b) invites
the Government and the applicant to submit, within six months from
the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, their written
observations on the matter and, in particular, to notify the Court of
any agreement that they may reach;
(c) reserves
the further procedure and delegates to the President of the
Chamber the power to fix the same if need be;
Dismisses the remainder of the applicant's claim
for just satisfaction.
Done in English, and notified in writing on 22 November 2007,
pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
