European Court of Human Rights

 

 

 

SECOND SECTION

 

 

 

 

 

 

CASE OF VIRPROD-LUX S.R.L. v. THE REPUBLIC OF MOLDOVA

 

( Application no. 5067/08 )

 

 

 

 

 

 

 

 

 

JUDGMENT

 

 

STRASBOURG

 

18 June 2019

 

 

 

 

 

This judgment is final but it may be subject to editorial revision.

 

In the case of Virprod -Lux S.R.L. v. the Republic of Moldova ,

The European Court of Human Rights ( Second Section ), sitting as a Committee composed of:

Egidijus Kūris , President,
Valeriu Griţco ,
Darian Pavli, judges,
and Hasan Bakırcı , Deputy Section Registrar ,

Having deliberated in private on 28 May 2019 ,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1.     The case originated in an application (no. 5067/08) against the Republic of Moldova lodged with the Court under Article   34 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") by a company incorporated in Moldova, Virprod -Lux S.R.L. ("the applicant company"), on 14 December 2007.

2.     The applicant company was represented by Mr V. Nagacevschi , a lawyer practising in Chişinău . The Moldovan Government ("the Government") were represented by their Agent at the time, Mr L. Apostol.

3.     The applicant company alleged, in particular, that it had been the victim of unfair civil proceedings and arbitrary deprivation of property.

4.     On 6   May 2011 the Government were given notice of the application .

THE FACTS

I.     THE CIRCUMSTANCES OF THE CASE

5.     The applicant company, Virprod -Lux S.R.L., is a company incorporated in Moldova.

6.     On 13 April 2000 the Tax Authority seized a building from a State - owned company, company V., on account of taxes which were due.

7.     On 1 October 2000, at the request of the Tax Authority, the building was valued by an estate agency at 352,000 Moldovan lei (MDL).

8.     On 29 January 2001 the Department of Privatisation and Administration of State Property sold the building in question to company B. for MDL 360,500 (approximately 29,678 Euros (EUR), following a public auction.

9.     On 25 April 2003 the applicant company bought the building from company B. for MDL 628,000 (approximately EUR 22,053).

10.     On 29 March 2007 the Prosecutor General ' s Office initiated court proceedings in which it sought the annulment of both the sale of the building on 29   January 2001 and the subsequent transaction between company B. and the applicant company. It also sought the return of the building to its initial owner, company V. The reason relied upon by the Prosecutor ' s General ' s Office was that the valuation of the building conducted by the estate agency had not been carried out in accordance with the provisions of the law. The applicant company opposed the Prosecutor General ' s action and argued, among other things, that it was time-barred.

11.     On 21 August 2007 the Economic Court of Appeal dismissed the Prosecutor General ' s action as time-barred. The court held, inter alia, that in accordance with the statute of limitations, the Prosecutor General ' s action could not be initiated more than three years after the events in dispute had taken place.

12.     On 11 October 2007 the Supreme Court of Justice upheld an appeal by the Prosecutor General, reversed the judgment of the Economic Court of Appeal, and upheld the action in its entirety. The Supreme Court considered that the Prosecutor General ' s action concerned a declaration of the absolute nullity of the contracts in question and that therefore, in accordance with Article 217 of the Civil Code, enacted on 12 June 2003, it could not be limited in time. Following this judgment, the transactions of 29   January 2001 and 25 April 2003 were annulled and each party involved was ordered to return to the other parties whatever they received by virtue of those transactions.

13.     On 7 December 2007 the applicant company lodged a revision request against the above judgment in which it indicated that it had carried out an expert evaluation of the disputed building by an independent expert who determined its value at MDL 8,550,000 (approximately EUR 511,440) after the improvements made by the applicant company to it.

14.     In the meantime, the applicant company did not leave the disputed building because it had its production line there and it needed time and resources to find another suitable building and to move its production line.

15.     Since company V. did not need the disputed building, the applicant company proposed to it and the latter accepted to conclude a friendly settlement agreement in accordance with which company V. agreed that the applicant company would retain ownership of the building in exchange for MDL   325,092 (approximately EUR 19,328).

16.     On 20 March 2008, within the framework of the review proceedings, the Supreme Court of Justice upheld the parties ' request to settle the case. It confirmed the friendly settlement agreement between the applicant company and company V., and on that basis it quashed its previous judgment and rejected the Prosecutor General ' s action.

17.     It is unclear from the materials of the case and the parties ' submissions whether after the adoption of the judgment of 11   October 2007 by the Supreme Court of Justice, company B. returned to the applicant company the amount received as a result of the transaction of 25   April 2003.

II.     RELEVANT DOMESTIC LAW

18.     The relevant provisions of the Civil Code, in force before 12   June 2003, provided:

Article 74

"The general limitation period for protecting an individual ' s rights by means of a court action is three years; it is one year for lawsuits between State organisations, collective farms and any other social organisations."

Article 78

"The competent court ... shall apply the limitation period, whether or not the parties request the application [of the limitation period]."

Article 83

"The expiry of the limitation period prior to the initiation of court proceedings constitutes grounds for rejecting the claim.

If the competent court ... finds that the action has not commenced within the limitation period for well-founded reasons, the right in question shall be protected."

19 .     The relevant provisions of the new Civil Code, in force after 12   June 2003, read as follows:

Article 6. The action in time of civil law

"(1)     Civil law does not have retroactive effect. It cannot alter or abolish the conditions in which a prior legal situation was constituted, or the conditions in which such a legal situation ceased to exist. New law cannot alter or abolish the already created effects of a legal situation which has ceased to exist or is ongoing."

Article 217. The absolute nullity of a legal act

"(1)     The absolute nullity of a legal act can be invoked by any person with an interest [in the relevant proceedings]. The court can invoke it of its own motion ...

...

(3)     An action to declare the absolute nullity [of a legal act] is not limited in time."

20 .     In a judgment of 20 April 2005 (case no. 2ra-563/05) the Supreme Court of Justice dismissed a claimant ' s contentions based on the provisions of the new Civil Code, on the grounds that the facts of the case related to a period before the entry into force of the new Civil Code, and therefore the provisions of the old Civil Code were applicable.

THE LAW

21.     The applicant company complained that the relevant proceedings had been unfair, contrary to Article 6 § 1 of the Convention, which, in so far as relevant, provides:

"1.     In the determination of his civil rights and obligations ... everyone is entitled to a fair hearing ... by a tribunal ...."

22.     The applicant company also complained that its right as guaranteed under Article 1 of Protocol No. 1 to the Convention had been violated as a result of the outcome of the proceedings. Article 1 of Protocol No. 1 to the Convention provides:

"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."

I.     ADMISSIBILITY OF THE COMPLAINTS

23.     The Government submitted that the applicant company had lost its victim status, because it had concluded a friendly settlement agreement with company V. and had retained ownership of the building. The applicant company disagreed and argued that it had had to pay for the building once again in order to retain ownership. Moreover, the breach of its rights had not been acknowledged and it had not received any compensation for that breach.

24.     The Court reiterates that a decision or measure favourable to an applicant is not in principle sufficient to deprive him or her of victim status unless the national authorities have acknowledged, either expressly or in substance, and then afforded redress for, the breach of the Convention (see Amuur v. France , 25 June 1996, §   36, Reports of Judgments and Decisions 1996 - III).

25.     In the instant case, it is true that the applicant company was able to retain ownership of the building. However, that happened only after it concluded a friendly settlement agreement with company V. and paid that company for the building. However, it does not appear that the national authorities acknowledged the breach of its Convention rights, or that it was afforded redress for the damage it had incurred. The Government ' s objection must therefore be rejected.

26.     The Court considers that the applicant company ' s complaints raise questions of fact and law which are sufficiently serious that their determination should depend on an examination of the merits, and no other grounds for declaring them inadmissible have been established. The Court therefore declares the application admissible.

II.     ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION

27.     The applicant company submitted that the proceedings had been unfair because the domestic courts had failed to apply the statute of limitations in accordance with the provisions of the former Civil Code. As a result, the Prosecutor General had been able to successfully challenge the sale of the building to company B. more than six years after the sale had taken place, disregarding the principle set out in Article 6 of the new Civil Code (see paragraph 19 above).

28.     The Government did not make any submissions on the merits of this complaint.

29.     The Court refers to its previous case-law, in which it has stated that the observance of admissibility requirements for carrying out procedural acts is an important aspect of the right to a fair trial. The role played by limitation periods is of major importance when interpreted in the light of the Preamble to the Convention, which, in its relevant part, declares the rule of law to be part of the common heritage of the Contracting States (see Dacia   SRL v. Moldova , no. 3052/04, § 75, 18 March 2008).

30.     The Court reiterates that it is not its task to take the place of the domestic courts in interpreting domestic legislation. It is primarily for the national authorities, notably the courts, to resolve problems of interpretation. This applies in particular to the interpretation by courts of rules of a procedural nature, such as the prescribed time-limit for instituting court actions. The Court ' s role is confined to ascertaining whether the effects of such an interpretation are compatible with the Convention in general and with the principle of legal certainty, guaranteed by Article 6, in particular (see, mutatis mutandis , Platakou v. Greece , no. 38460/97, §   37, ECHR 2001 - I).

31.     In the present case, the Court notes that the time-limit for challenging the sale of 29 January 2001, provided for by the Civil Code in force at the material time, expired in 2004. This was confirmed by the Economic Court of Appeal, which accepted the applicant ' s objection concerning the statute of limitations (see paragraph 11 above). Nevertheless, the Supreme Court of Justice chose not to dismiss the Prosecutor General ' s action in accordance with the provisions of the old Civil Code, but to apply the provisions of the new Civil Code, which had entered into force in June 2003.

32.     The Court does not contest the State ' s power to enact new legislation regulating time-limits in civil proceedings. However, it does not follow that it is compatible with the Convention to apply those new rules in a manner which would unsettle legal situations which have become final due to the application of the relevant limitation period before the enactment of such legislation. To admit the contrary would amount to admitting that a State is free to disregard a time-limit and challenge final legal situations simply by making use of its power to enact new legislation after the expiry of the time - limit in question (see Ipteh SA and Others v. Moldova , no. 35367/08, §   35, 24   November 2009). The Court notes that the above conclusion appears to be consistent with Article 6 of the new Civil Code, which states that the new Code cannot have retroactive effect and cannot "alter or abolish the conditions in which a prior legal situation was constituted, or the conditions in which such a legal situation ceased to exist" (see paragraph 19 above).

33 .     In the light of the above-mentioned factors, the Court considers that there has been a violation of Article 6 § 1 of the Convention as a result of the Prosecutor General ' s action for the annulment of the transactions of 2001 and 2003 being upheld in breach of the principle of legal certainty.

III.     ALLEGED VIOLATION OF ARTICLE 1 of protocol n o . 1 to THE CONVENTION

34.     The applicant company complained that the judgment upholding the Prosecutor General ' s action for the annulment of the relevant transactions had had the effect of infringing its right to the peaceful enjoyment of its possessions as secured by Article 1 of Protocol No. 1 to the Convention. The Government did not make any submissions in this regard.

35.     The Court considers that the applicant company had a "possession" for the purposes of Article 1 of Protocol No. 1. It found that the upholding of the Prosecutor General ' s action after the expiry of the general time-limit had been incompatible with the principle of legal certainty (see paragraph 33 above). In such circumstances, the Court cannot but consider that the upholding of the Prosecutor General ' s action constituted an unjustified interference with the applicant company ' s right of property, because a fair balance was not preserved and the applicant company was required to bear and continue to bear an individual and excessive burden (see, mutatis   mutandis , Brumărescu v. Romania [GC], no. 28342/95, §§   75-80, ECHR 1999 - VII). As in Dacia   SRL (cited above), the domestic courts did not provide any justification for the impugned interference. It follows that there has also been a violation of Article 1 of Protocol No. 1 to the Convention.

IV.     APPLICATION OF ARTICLE   41 OF THE CONVENTION

36.     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.     Pecuniary Damage

37.     The applicant company claimed 35,092.21 euros (EUR) in respect of pecuniary damage. The amount claimed was broken down as follows: EUR   20,720.52 for the money the applicant company had had to pay to company V. in accordance with the friendly settlement agreement in order to retain ownership of the disputed building; EUR 1,086.23 for the fees paid for the execution proceedings; EUR   924.08 for court fees; EUR   950.58 for the lawyer ' s fees during the domestic proceedings; and default interest on the above amounts until December 2011.

38.     The Government submitted that the amount claimed was unfounded because it was the applicant company itself which engaged those expenses by negotiating and signing the friendly settlement agreement with company V., and that there was no causal link between that amount and the alleged violation of the applicant company ' s Convention rights.

39.     The Court notes that the Government did not contest the fact that the applicant company had spent the above amounts in order to be able to retain ownership of the disputed building as a result of the proceedings which had led to the annulment of its right of property. Nor did the Government adduce evidence to show that company B. had returned to the applicant company the money it had paid for the building in January 2003. In such circumstances, the Court considers that the applicant company ' s claim in respect of pecuniary damage is well-founded, and awards it in full.

B.     Non-pecuniary damage

40.     The applicant company also claimed EUR 10,000 in respect of non - pecuniary damage.

41.     The Government contended that the claim was excessive, and asked the Court to dismiss it.

42.     Having regard to the violation found above, the Court considers that an award in respect of non-pecuniary damage is justified in this case. Making its assessment on an equitable basis, the Court awards the applicant company EUR   2,000 in respect of non-pecuniary damage.

C.     Costs and expenses

43.     The applicant company also claimed EUR 1,610 for the costs and expenses incurred before the Court.

44.     The Government argued that the amount was excessive, and asked the Court to dismiss the claim.

45.     The Court reiterates that in order for costs and expenses to be included in an award under Article 41 of the Convention, it must be established that they were actually and necessarily incurred and were reasonable as to quantum (see, for example, Amihalachioaie v. Moldova , no.   60115/00, § 47, ECHR   2004 - III).

46.     In the present case, regard being had to the documents in its possession, the Court considers it reasonable to award the amount claimed in full.

D.     Default interest

47.     The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1.     Declares the application admissible;

 

2.     Holds that there has been a violation of Article 6 § 1 of the Convention;

 

3.     Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

 

4.     Holds

(a)     that the respondent State is to pay the applicant company , within three months, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

( i )     EUR 35,092.21 (thirty-five thousand and ninety-two euros and twenty-one cents), plus any tax that may be chargeable, in respect of pecuniary damage;

(ii)     EUR 2,000 (two thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iii)     EUR 1,610 (one thousand six hundred and ten euros), plus any tax that may be chargeable to the applicant company , in respect of costs and expenses;

(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;

 

5.     Dismisses , unanimously, the remainder of the applicant company ' s claim for just satisfaction.

Done in English, and notified in writing on 18 June 2019 , pursuant to Rule   77   §§   2 and 3 of the Rules of Court.

Hasan Bakırcı Egidijus Kūris
Deputy Registrar President