(Applications nos. 32921/03, 28464/04 and 5344/05)
15 October 2009
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 Kohlhofer and Minarik v. the Czech Republic,
The European Court of Human Rights (Fifth Section), sitting as a Chamber composed of:
Mirjana Lazarova Trajkovska,
Zdravka Kalaydjieva, judges,
and Claudia Westerdiek, Section Registrar,
Having deliberated in private on 15 September 2009,
Delivers the following judgment, which was adopted on that date:
I. THE CIRCUMSTANCES OF THE CASE
Application no. 32921/03
Application no. 28464/04
Application no. 5344/05
II. RELEVANT DOMESTIC LAW
1. The Constitution
2. The Commercial Code (as in force at the relevant time)
3. The Act on Transformation of Companies and Cooperatives (no. 125/2008)
4. The Code of Civil Procedure (as in force in the relevant time)
5. The Constitutional Court Act (Act no. 182/1993)
6. Act on Courts and Judges (acts nos. 335/1991 and 182/1993 respectively)
III. RELEVANT DOMESTIC PRACTICE
1. Judgment of the Constitutional Court no. I. ÚS 70/96
68. In its judgment of 18 March 1997 the Constitutional Court, interpreting Article 89(2) of the Constitution, rejected the assumption according to which its views enshrined in reasoning of its judgments are legally irrelevant. The court held inter alia that an a priori disrespect by ordinary courts towards such views raises doubts whether ordinary courts decide in conformity with Article 90 of the Constitution, according to which their principal task is to ensure the protection of rights pursuant to law. Ordinary courts declining to follow such views must be aware that their rulings will be most probably brought by the Constitutional Court in line with its existent case law. The Constitutional Court added in this regard that an a priori disrespect towards existent case law, resulting in different decisions on a same matter, contravenes the principle of legal certainty, which is an indispensable component of constitutional law and the rule of law.
2. Decision of the Constitutional Court no. III. ÚS 527/04
“The law providing for the winding up of a company and the transfer of its assets to its main shareholder is at the very limit of constitutional conformity owing to the imperfect coordination of proceedings for a registration into the commercial register with proceedings to set aside an asset transfer contract (filed together with an application to set aside a general meeting resolution) which makes possible the irreversible registration of [the winding up of a company and the transfer of its assets to its main shareholder] into the commercial register without examination of an action to set it aside. It cannot be said, however, that minority shareholders have no remedy at their disposal.. ..[A]ccording to Article 131(4) of the [CC], they can seek damages and just satisfaction.
The law governing proceedings before a court in charge of the commercial register is proportionate to the aim and objective of the legislation providing for transformations of companies, whose purpose is to accommodate expeditious registration of those transformations, made on the basis of the agreement among the companies' shareholders, into the commercial register, with regard to the fact that such a transformation is from a certain moment irreversible owing to legal, economic and technical aspects of that process.
...[T]he impugned decision of the court in charge of the commercial register did not amount to unconstitutional interference with the appellant's property rights as he retained access to legal remedies for the protection of his ownership rights to the shares in a proportionate manner.. ..[L]egitimate expectations of shareholders do not have the same intensity as those of owners of other property. ..[as] the nature of a joint stock company implies risks of a change in the shareholders' status...
The gist of the appeal consists in the applicant's disagreement with the law providing for [the winding-up of a company and the transfer of its assets to its main shareholder] as such, in particular with the insufficient guarantees for minority shareholders. The Constitutional Court, however, by Section 74 of the Constitutional Court Act is not empowered to examine these complaints as the appeal at hand contested only the decision adopted by the court in charge of the commercial register in the proceedings on the registration of the winding up and the transfer into the commercial register. [Examination] of these complaints would go beyond the scope of that court's review defined by the applicants' constitutional appeal contesting the decision of the court in charge of the commercial register which decided on the registration in the commercial register, not on decisions adopted in other proceedings available to the complaining minority shareholders.”
3. Decision of the Supreme Court no. 29 Odo 1128/2005 of 23 May 2007
I. JOINDER OF THE APPLICATIONS
II. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION
They relied on Article 6 § I of the Convention, which reads as follows:
“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”
73. The Government disagreed.
In these circumstances, the Court considers that the domestic courts' case law on the question was settled such that the applicants could not reasonably be expected to have pursued (or, in the case of application no. 32921/03, to await the outcome of) separate constitutional complaints in the individual set-aside proceedings. It is true, as the Government point out, that that case law consists of decisions rather than judgments. However, in the absence of any such judgments, or any indication that the Constitutional Court would regard those decisions as irrelevant, the Court does not consider that the decisions should be afforded lesser weight for the purposes of the review under Article 35 § 1 of the Convention.
Accordingly, the Government's objection is in this respect dismissed for all three applications.
1. The parties' submissions
(a) The applicants
(b) The Government
2. The Court's assessment
However, being able to put a case to a court does not in itself satisfy all the requirements of that provision. It must also be established that the degree of access afforded under the national legislation was sufficient to secure the individual's “right to a court”, having regard to the rule of law in a democratic society (Petkoski and Others v. "the former Yugoslav Republic of Macedonia", no. 27736/03, § 40, 8 January 2009 which itself refers to Ashingdane v. the United Kingdom, judgment of 28 May 1985, Series A no. 93, § 57). Moreover, Article 6 § 1 of the Convention guarantees the right of access to a court which does not only include the right to institute proceedings, but also the right to obtain a “determination” of the dispute by a court. As stated in the Court's case-law, “it would be illusory if a Contracting State's domestic legal system allowed an individual to bring a civil action before a court without securing that the case would be determined by a final decision in the judicial proceedings. It would be inconceivable that Article 6 § 1 of the Convention should describe in detail procedural guarantees afforded to litigants - proceedings that are fair, public and expeditious - without guaranteeing the parties to have their civil disputes finally determined” (Petkoski, cited above, and Multiplex v. Croatia, no. 58112/00, §§ 44 and 45, 10 July 2003).
At the same time, the “right to a court” is not absolute; it is subject to limitations permitted by implication, since by its very nature it calls for regulation by the State, which enjoys a certain margin of appreciation in this regard. However, these limitations must not restrict or reduce a person's access in such a way or to such an extent that the very essence of the right is impaired (Edificaciones March Gallego S.A. v. Spain, 19 February 1998, § 34, Reports of Judgments and Decisions 1998 I). In addition, the principle of the rule of law and the notion of fair trial enshrined in Article 6 § 1 of the Convention preclude any interference by the legislature with the administration of justice designed to influence the judicial determination of the dispute (Stran Greek Refineries and Stratis Andreadis v. Greece, judgment of 9 December 1994, Series A no. 301-B, § 49).
i. Application no. 32921/03
It follows that there was no limitation on access to court concerning the applicants' claim that the asset transfer contract was unlawful.
Accordingly, the Court dismisses the Government's objection of non-exhaustion of domestic remedies in this respect and finds that there has been a violation of Article 6 § 1 of the Convention.
ii. Application no. 28464/04
As for the proportionality of that limitation, the Court notes that the Government relied, as in application no. 32921/03 above, on the existence of alternative legal avenues which rendered the limitation compatible with the Convention. The Court further notes that in its view expressed above those legal avenues did not constitute remedies to be exhausted within the meaning of Article 35 § 1 of the Convention, nor could they adequately mitigate the impairments of minority shareholders' rights caused by that limitation (see paragraph 101 above). Given that the third applicant's right to access to a court was limited as a result of the operation of Article 220h(4) of the CC in a manner similar to that in application no. 32921/03, the Court finds that the availability of alternative remedies could not satisfy the requirements of Article 6 § 1 of the Convention in the present application.
iii. Application no. 5344/05
As to the claim that the courts did not deal with the merits of the proceedings to have the transfer set aside, the Court notes that those proceedings were discontinued by the decisions of the Ostrava Regional Court and Olomouc High Court of 14 March 2008 and 1 July 2008 respectively, without having been examined on merits. Both courts, referring to the registration of the transfer in the commercial register, relied on Article 220h(4) of the CC which prevented them from further reviewing the action to set aside. The Court observes that the first applicant had no standing in the proceedings on the registration of the transfer into the commercial register, and that those proceedings were not adjourned pending the outcome of the challenge to the resolution and the contract.
In the light of the foregoing, the Court dismisses the Government's non-exhaustion arguments in this respect and finds that there has been a violation of Article 6 § 1 of the Convention.
III. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
“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.”
It follows that this part of the applications is premature within the meaning of Article 35 § 1 of the Convention and must be declared inadmissible pursuant to Article 35 § 4 of the Convention.
IV. APPLICATION OF ARTICLE 13 OF THE CONVENTION
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
It follows that this complaint is manifestly ill-founded pursuant to Article 35 § 3 of the Convention and must de declared inadmissible in accordance with Article 35 § 4 of the Convention.
V. APPLICATION OF ARTICLE 41 OF THE CONVENTION
“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.”
The Government maintained that the applicants failed to establish any damage. They saw no casual link between the alleged damage and the violation of Article 6 § 1 of the Convention. They noted in respect of the third applicant that the asserted arbitration fee was incurred by all three petitioners together, not just by the third applicant.
The Court considers that the damage alleged by the applicants is connected to the loss of their shares upon the liquidation of the companies and the attempts to recover it in proceedings before domestic courts. These claims, however, are linked to the complaint under Article 1 of Protocol No. 1, which has been declared inadmissible. It follows that no casual link has been established between the alleged damage and the violation found. As for the damage allegedly incurred by the payment of the arbitration fee, the third applicant did not allege in her submissions under Article 1 of Protocol No. 1 that her property rights had been impaired by the payment of that fee. Even if she had done so, no casual link between the alleged damage and the violation found could be established as only a violation of Article 6 § 1 of the Convention was found.
No award under this head is therefore granted.
The Government pointed out that the Convention system does not recognize actio popularis and therefore only the situation of the applicants may be taken into consideration. They consider that a mere statement of finding a violation of Article 6 § 1 of the Convention is sufficient satisfaction for the applicants.
The Court, ruling on an equitable basis and in accordance with its case law concerning the denial of access to a court, holds that finding a violation of Article 6 § 1 of the Convention represents in itself just satisfaction for the applicants.
B. Costs and expenses
Invoking Rule 60 paragraph 2 and 3 of the Rules of Court, the Government asserted that it appeared that the applicants had not provided within the time specified therein any documents proving the payment of those costs at the amount sought. They contended that the Court should reject the claim as insufficiently grounded (Aldoshkina v. Russia, no. 66041/01, § 32, 12 October 2006).
C. Default interest
FOR THESE REASONS, THE COURT
a) that the respondent State is to pay, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 2,264 (two thousand two hundred and sixty four euro) in respect of each application for costs and expenses, to be converted into the national currency of the respondent State at the rate applicable at the date of settlement, together with any tax that may be chargeable to the applicants;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
Done in English, and notified in writing on 15 October 2009, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the dissenting opinion of Judge Jaeger joined by Judge Rait Maruste is annexed to this judgment.
DISSENTING OPINION OF JUDGE JAEGER,
JOINED BY JUDGE MARUSTE
I am unable to agree with the majority's finding of a violation of Article 6 § 1 of the Convention – access to court – without any determination of the substantive civil right at stake.
The case is about the rights of shareholders as defined by the Czech law. On the one hand owners of shares may be protected under Article 1 of Protocol No. 1 in so far as these shares constitute a possession or a property right of a certain variable value according to the stock market. But the Chamber declared these claims inadmissible as being premature (§ 110-112). On the other hand shareholders are empowered to participate in certain decisions concerning the future of the company concerned by means of resolutions taken within a general meeting, which is an added value to the pure monetary value.
These decisions are taken under the majority rule. Shareholders being in the majority have the overwhelming power to transform the company into something different and to transfer its assets. Minority rights are rather limited, according to the restrictions by law: the minority, or a single shareholder, can institute proceedings to set aside such resolutions, but cannot inhibit registration following the majority's vote by virtue of his own right. After registration the minority's rights dwindle to a mere right to compensation. This is all set out in the judgment under § 42-59.
The Czech courts gave some reasoning why they considered those restrictions of shareholder rights to be legitimate – legal certainty and the expeditious transformation of companies. The court administering the commercial register was established to project majority rights and the rights of the company as such (see paragraph 12 of the judgment). In addition, by reviewing the legality of the decision-making process within the company the courts administering the commercial register also protect the public interest in ensuring that the law is complied with.
I am of the opinion that the restrictions of which the applicants complain are partly implemented by substantive provisions, partly by procedural ones. Whether these restrictions are in conformity with Convention rights cannot be answered by Article 6 § 1 of the Convention only focusing on the procedural aspect, even limited to one single factor within the procedural safeguards. In the context of civil rights that are not to be exercised individually but collectively together with other shareholders in the same position and under the obligation to reach a majority vote, access to court cannot be understood as a purely individual right to challenge and suspend every decision. This would at the same time grant every single shareholder a veto right against majority decisions. Thus the scope of shareholders' voting rights is defined within the limits of judicial control attached to them.
Whether the rights enshrined in the Convention demand for an extension of minority rights with the aim to sufficiently protecting a minority of shareholders cannot be answered by Article 6 § 1 of the Convention but only by Article 1 of Protocol No. 1. It is a substantive and not a procedural question.
Article 6 of the Convention applies under its “civil head” if there was a “dispute” over a “right” which can be said, at least, on arguable grounds, to be recognised under domestic law irrespective of whether it is also protected under the Convention (see Associazone Nazionale Reduci Dalla Prigonia Dall'Internamento E Dalla Guerra Di Liberazione and others v. Germany, no. 45563/04; J.S. and A.S. v. Poland, no. 40732/98, 24 May 2005). The absence of a legitimate expectation of a property right or any other civil right does not presuppose the absence of a right recognised on arguable grounds and the applicability of Article 6 of the Convention. The Court therefore has always to examine whether there was a dispute over a defendable right, which the Chamber did not do in any depth in this case.
The civil right under dispute might be the purely financial property right embodied in the share. This dispute is still pending as conceded by the majority of the Chamber. It might as well be the additional right to influence important resolutions taken in a general meeting. The only existing legal provisions regarding a right to influence the future of a company clearly limit shareholders' bearing to a right to participate and vote in the general meeting, to a right to challenge resolutions as long as the changes are not registered and assets transferred by the commercial court, and – after the registration finalises the transactions – to claim compensation in case of any damages sustained or of inadequate compensation paid for their shares. Domestic law neither provides for any right to set aside majority resolutions nor to suspend their execution after registration. Minority shareholders are clearly excluded from these rights. Thus they cannot claim to have such right on arguable grounds. Article 6 § 1 of the Convention is not applicable (see Associazone Nazionale, referred to above).
Finding Article 6 of the Convention not applicable in the case does not necessarily exclude finding a violation under Article 1 of Protocol No. 1 to the Convention. This question, especially whether the law strikes a fair balance between the competing interests of the majority's rights and the public interest in the functioning of economy under the safeguards of the rule of law on the one hand and the protection of minority rights on the other hand, cannot be decided before compensation is determined. In the course of their scrutiny the courts will have to examine whether the totality of restrictions, including those on access to court, can be deemed necessary to control the use of property in accordance with the general interest (under the second paragraph of Article 1 of Protocol No. 1). I agree with the majority of the Chamber under § 112 that this part of the application is premature.