CASE OF AVDYUSHKIN v. RUSSIA
(Application no. 10511/04)
12 December 2017
This judgment is final but it may be subject to editorial revision.
In the case of Avdyushkin v. Russia,
The European Court of Human Rights (Third Section), sitting as a Committee composed of:
Luis López Guerra, President,
Jolien Schukking, judges,
and Fatoş Aracı, Deputy Registrar,
Having deliberated in private on 21 November 2017,
Delivers the following judgment, which was adopted on that date:
1. The case originated in an application (no. 10511/04) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Mr Valentin Nikitovich Avdyushkin (“the applicant”), on 7 February 2004.
2. In 2007 the applicant died. His sister and heir Ms Raisa Nikitichna Avdyushkina took up the application and authorised her daughter Ms M. Avdyushkina to represent her. The Government did not object to the succession and the Court accepts it.
3. The Russian Government (“the Government”) were represented initially by Mr G. Matyushkin, the Representative of the Russian Federation to the European Court of Human Rights, and then by his successor in that office, Mr M. Galperin.
4. The applicant complained that a court frustrated his collection attempts by improperly relieving a judgment debtor.
5. On 4 September 2008 the application was communicated to the Government.
I. THE CIRCUMSTANCES OF THE CASE
6. The applicant was born in 1934 and lived in Moscow.
7. In June 1998 he deposited 5,187.40 United States dollars in a three-month account with Russian Credit, a private bank.
8. In August 1998 the country suffered a financial crisis, the rouble fell, and the bank defaulted. In December 1998 the applicant accepted the bank’s offer to settle and close his account in return for the balance in depreciated roubles. By the time the money reached the applicant in March 1999, the rouble had depreciated further.
9. In October 1999 the bank went into external administration and its debt repayments were frozen pending a restructuring.
10. In May 2000 the bank and its creditors negotiated a group settlement of the pre-October 1999 debt and had it approved by the courts. The settlement discharged the bank from fines, penalties, default interest, and damages arising under legislation, contracts with clients, and court decisions.
11. In December 2001 the applicant sued the bank for the loss caused by the exchange-rate fluctuations between the day he had accepted the bank’s offer and the day the money had arrived. The bank objected to that claim on the ground that it had extinguished its obligations by repaying the deposit to the applicant. On 17 April 2002 the Golovinskiy District Court of Moscow awarded the applicant 77,603.50 Russian roubles (RUB).
12. In May 2003 the applicant filed a writ of execution with a bailiff.
13. On 17 June 2003, on the application of the bank, the District Court terminated the enforcement of its judgment in view of the group settlement. The District Court said:
Considering the nature of the legal relationship at issue, the court takes into account the fact that the enforcement proceedings have been instituted with the purpose of collecting from [Russian Credit] the liabilities that had come into existence before 18 October 1999 inclusive and, under the ... terms of the friendly settlement, are related to [the bank’s] restructured liabilities subject to novation on the terms of the friendly settlement approved by a [court decision] that had defined the procedure and terms of the extinction of the liabilities.
Pursuant to section 23 § 2 of the Federal Law on Enforcement Proceedings, the conclusion of a friendly settlement between a creditor and a debtor constitutes a ground for the termination of the enforcement proceedings, and therefore the [bank’s] application shall be granted and the [enforcement proceedings] shall be terminated.
14. In July 2003, in reply to the applicant’s query, the bank’s external administrator informed the applicant that his deposit had not been on the books and that under the terms of the group settlement his judgment debt could not be paid.
15. On 14 August 2003 the Moscow City Court upheld the District Court’s decision, finding that the applicant’s individual claim was to be settled with the group claim. The City Court said:
When terminating the [enforcement] proceedings the [District Court] has referred to the provisions of section 439 of the Code of Civil Procedure and reached the conclusion that the terms of the said friendly settlement regarding the restructuring of the credit obligations of [Russian Credit] extended also to [the applicant].
The [City Court] agrees with the said conclusion of the [District Court] as based on the provisions of the law and confirmed by the circumstances of the present case.
II. RELEVANT DOMESTIC LAW
16. The Law on Restructuring of Credit Organisations 1999 said:
Section 23. Conclusion of friendly settlement
1. A credit organisation and its creditors may conclude a friendly settlement for the purpose of restructuring the organisation....
2. The decision to conclude the friendly settlement on behalf of the creditors shall be taken by the creditors’ assembly....
3. The creditors’ assembly shall apply to a commercial court for approval of the friendly settlement....
17. The Law on Insolvency (Bankruptcy) 1998 said:
Section 120. General provisions
1. At any stage of the [insolvency proceedings] the debtor and creditors may conclude a friendly settlement.
2. A decision to conclude the friendly settlement on behalf of ... creditors shall be made by the creditors’ assembly....
4. The friendly settlement shall be approved by a commercial court and mentioned in the court’s decision on the termination of the insolvency proceedings....
5. The friendly settlement enters into force in respect of the debtor, ... creditors, and third parties participating in it on the day of its approval by the commercial court and is binding on the debtor, creditors, and ... third parties.
18. The Code of Civil Procedure 2002 said:
Section 439. Termination of enforcement proceedings
1. Enforcement proceedings shall be terminated by a court if:
2. the creditor and debtor have concluded a friendly settlement and it has been approved by a court.
19. The Law on Enforcement Proceedings 1997 said:
Section 23. Grounds for terminating enforcement proceedings
Enforcement proceedings shall be terminated if:
2. a court approves a friendly settlement between the creditor and debtor.
I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION AND ARTICLE 1 OF PROTOCOL No. 1
20. The applicant complained under Article 6 of the Convention and Article 1 of Protocol No. 1 that he was unable to have the judgment of 17 April 2002 enforced. As far as relevant, these Articles read:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal....”
“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.”
1. The Government
21. The Government rejected the complaint as manifestly ill-founded.
22. A judgment may be left unenforced for legitimate reasons. The Golovinskiy District Court had had to terminate the enforcement because its judgment had related to the debt restructured in the group settlement. Bankruptcy laws allowed debts to be discharged (Shestakov v. Russia (dec.), no. 48757/99, 18 June 2002). The applicant had obtained his judgment in circumvention of the group settlement.
23. The judgment debt had not been a “possession” within the terms of Article 1 of Protocol No. 1. In December 1998 the applicant had settled individually. Though the judgment debt had technically been enforceable, it was to be discharged under the group settlement.
24. Any possible interference with the applicant’s rights had been “control of use” in the public interest. In the aftermath of the financial crisis of August 1998, the government had had both to save the bank and satisfy its creditors. Partial satisfaction under the group settlement had helped calm social tensions and had served the creditors better than liquidation of the bank.
25. Any possible interference had been proportionate to that public interest. When the applicant had settled on his own he had recovered his deposit. He had waited a whole two years and eight months after the payment before suing for damages. It had taken him another year to apply for enforcement.
26. The group settlement had been approved by a court in a fair procedure, in which the applicant could have participated. The deal voted by a majority of the creditors had been rightfully binding on the entire class of creditors.
2. The applicant
27. The applicant maintained his complaint.
28. There had been no legitimate reasons to terminate the enforcement. He had not been able to object to the group settlement as he had learned about it after the fact. The termination had been the product of a government policy to have undesirable judgments against the bank quashed. Such judgments had been routinely terminated by the same courts that had given them, albeit by subservient judges.
29. The group settlement had not bound him because his name had not even been on the list of creditors. The settlement had been engineered by the authorities, had favoured the bank’s corporate clients and had contained loopholes exploitable in court. Still, the settlement did help the bank recover. The benefits of the settlement should have been spread to those who, as the applicant, had settled individually. He had sued in good time. By awarding him a sum of money, the Golovinskiy District Court had confirmed the justice of his claims.
3. The Court
30. The Court notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
31. The Court reiterates its case-law to the effect that the right of access to a tribunal guaranteed by Article 6 § 1 of the Convention would be illusory if a Contracting State’s domestic legal system allowed a final, binding judicial decision to remain inoperative to the detriment of one party. Execution of a judgment given by any court must therefore be regarded as an integral part of the “trial” for the purposes of Article 6 (see, inter alia, Hornsby v. Greece, 19 March 1997, §§ 40 et seq., Reports 1997-II, and Metaxas v. Greece, no. 8415/02, § 25, 27 May 2004). The Court has pointed out in civil length-of-proceedings cases that the enforcement proceedings are the second stage of the proceedings and that the right asserted does not actually become effective until enforcement (see, among other authorities, Di Pede v. Italy and Zappia v. Italy, 26 September 1996, §§ 22, 24 and 26 and §§ 18, 20 and 22 respectively, Reports 1996-IV, and, mutatis mutandis, Silva Pontes v. Portugal, 23 March 1994, § 33, Series A no. 286-A). While delays in enforcement might be justified in exceptional circumstances, only periods strictly necessary to enable the authorities to find a satisfactory solution are covered (see Immobiliare Saffi [GC], cited above, § 69; and Sokur v. Ukraine, no. 29439/02, § 30, 26 April 2005).
32. All of the above notwithstanding, the right to a court, and the enforcement phase of a relevant court decision, is not absolute and may be subject to legitimate restrictions. Where the individual’s access is limited either by operation of law or in fact, the Court will examine whether the limitation imposed impaired the essence of the right and, in particular, whether it pursued a legitimate aim and there was a reasonable relationship of proportionality between the means employed and the aim sought to be achieved (see Ashingdane v. the United Kingdom judgment of 28 May 1985, Series A no. 93, pp. 24-25, § 57). If the restriction is compatible with these principles, no violation of Article 6 will arise (see Shestakov, cited above).
33. In addition, in the context of property-related matters, if an applicant is unable to obtain the execution of a judgment in his or her favour in due time, this constitutes an interference with the right to the peaceful enjoyment of possessions, as set out in the first sentence of the first paragraph of Article 1 of Protocol No. 1 to the Convention. Irrespective of whether a debtor is a private or a State-controlled entity, it is up to the State to take all necessary steps to enforce a final court judgment, and in so doing, to ensure the effective participation of its entire apparatus (see, mutatis mutandis, Pini and Others v. Romania, nos. 78028/01 and 78030/01, §§ 174-189, ECHR 2004-V; Hornsby, cited above, § 41).
34. Turning to the circumstances of the present case, the Court reiterates that in the event of the execution of a final court decision rendered against a private entity, the State is not, as a general rule, directly liable for the debts of private entities. Its obligations under Article 6 of the Convention and Article 1 of Protocol No. 1 are limited to providing the necessary assistance to the creditor in the enforcement of the respective court awards, for example, through enforcement proceedings or bankruptcy procedures (see, mutatis mutandis, Kotov v. Russia [GC], no. 54522/00, § 90, 3 April 2012). When the authorities are obliged to act in order to enforce a final court decision and they fail to do so, their inactivity may, in certain circumstances, engage the State’s responsibility under Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 (see Scollo v. Italy, judgment of 28 September 1995, Series A no. 315-C, § 44, and Fuklev v. Ukraine, no. 71186/01, § 84, 7 June 2005). The Court’s task in such cases is to examine whether the measures applied by the authorities were adequate and sufficient and whether they acted diligently in order to assist a creditor in the execution of a judgment (see Fociac v. Romania, no. 2577/02, § 70, 3 February 2005).
35. The Court observes that in the case under consideration on 17 April 2002 the Golovinskiy District Court of Moscow awarded the applicant a sum of money and that in May 2003 the applicant filed a writ of execution with a bailiff. When terminating the enforcement of that judgment, the District Court observed that the enforcement proceedings had been instituted with the purpose of collecting from the bank the liabilities that had come into existence before 18 October 1999 inclusive and, under the terms of the friendly settlement, were related to the bank’s restructured liabilities subject to novation on the terms of the friendly settlement approved by a court decision that had defined the procedure and terms of the extinction of the liabilities. By the same token, pursuant to section 23 § 2 of the Federal Law on Enforcement Proceedings, the conclusion of a friendly settlement between a creditor and a debtor constituted a ground for the termination of the enforcement proceedings, and therefore the bank’s application was to be granted and the enforcement proceedings were to be terminated.
36. The above conclusions were validated by the Moscow City Court which upheld the District Court’s judgment and found that the District Court had referred to the provisions of section 439 of the Code of Civil Procedure and reached the conclusion that the terms of the said friendly settlement regarding the restructuring of the credit obligations of the bank extended also to the applicant. The Court thus finds that the measures applied by the authorities were adequate and sufficient.
37. Assessing the totality of the circumstances of the present case, the reasons put forward by the domestic judicial authorities, and the manner in which they handled the matter, the Court cannot but conclude that a reasonable relationship of proportionality between the means employed and the aim sought has been achieved. In view of the above, the Court finds that there has been no violation of Article 6 § 1 of the Convention or of Article 1 of Protocol No. 1.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Holds that the applicant’s heir, Ms Raisa Nikitichna Avdyushkina, may pursue the application;
2. Declares the application admissible;
3. Holds that there has been no violation of Article 6 § 1 of the Convention or of Article 1 of Protocol No. 1;
Done in English, and notified in writing on 12 December 2017, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Fatoş Aracı Luis López Guerra
Deputy Registrar President
. EUR 2,800 on the date of the judgment.