European Court of Human Rights

 

 

FIRST SECTION

CASE OF SCOTT BADER D.O.O. AND MILETIĆ v. CROATIA

(Application nos. 46998/15 and 2 others)

 

 

 

 

 

JUDGMENT

STRASBOURG

 

 

 

 

2 December 2021

 

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

In the case of Scott Bader d.o.o. v. Croatia,

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

          Krzysztof Wojtyczek, President,
          Erik Wennerström,
          Ioannis Ktistakis, judges,
and Attila Teplán, Acting Deputy Section Registrar,

Having regard to:

the applications (nos. 46998/15, 6919/16 and 24312/16) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Scott Bader d.o.o., a commercial company incorporated under Croatian law, and by a Croatian national, Ms Mihajla Miletić (“the applicants”), on the various dates indicated in the appended table;

the decision to give notice to the Croatian Government (“the Government”) of applications nos. 46998/15 and 24312/16 and of the complaints concerning access to a court, lack of adequate reasoning and the peaceful enjoyment of possessions in application no. 6919/16 and to declare the remainder of that application inadmissible;

the parties’ observations;

the Government’s objection to the examination of applications nos. 46998/15 and 24312/16 by a Committee and to the Court’s decision to reject it;

Having deliberated in private on 9 November 2021,

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

INTRODUCTION

1.  The case mainly concerns the deprivation of property arising from a government decision on the restructuring and recovery of a commercial bank depriving its shareholders, including the applicants, of their shares, and the lack of access to a court in that regard.

THE FACTS

2.  The first applicant, Scott Bader d.o.o., is a limited liability company incorporated under Croatian law which has its registered office in Zagreb. The second applicant, Ms Mihajla Miletić, is a Croatian national who was born in 1947 and lives in Slavonski Brod. The first applicant was represented by Mr N. Antolić, a lawyer practising in Zagreb, and the second applicant by Ms T. Pracny-Novak, a lawyer practising in Slavonski Brod.

3.  The Government were represented by their Agent, Ms Š. Stažnik.

4.  The facts of the case, as submitted by the parties, may be summarised as follows.

I.        background to the case

5.  The applicants were shareholders of Croatia Bank (Croatia banka d.d. – hereinafter “the bank”), a joint-stock company incorporated under Croatian law which has its registered office in Zagreb. The bank was wholly owned by private individuals and companies. The applicants held 17,603 and 158 shares respectively, with a nominal value of 200 Croatian kunas (HRK) each.

6.  On 23 February 1999 the Croatian National Bank (Hrvatska narodna banka) adopted a decision appointing a temporary administrator to the bank. Pursuant to the Banks Act, from the date of service of that decision, all powers of the management board, the supervisory board and the shareholders’ general meeting were transferred to the temporary administrator (see paragraph 32 below).

7.  Meanwhile, on the basis of an expert report indicating that the bank’s debts largely outweighed its share capital and that it therefore presented a risk to the general stability of financial markets, on 18 June 1999 the Croatian National Bank proposed to the Government of Croatia that the process of recovery (sanacija) and restructuring of the bank be commenced, as provided for by domestic law.

8.  In accordance with that proposal, on 23 September 1999 the Government of Croatia adopted a decision on the recovery and restructuring of Croatia Bank (Odluka o sanaciji i restrukturiranju Croatia banke d.d., Zagreb, Official Gazette nos. 98/99 and 53/00 - hereinafter “the Government Decision”). It was published in the Official Gazette on 27 September 1999. As of that date, all shares held by the bank’s shareholders were revoked and cancelled. Following the recovery process, the bank was to issue new shares, all in the name of the State Agency for Deposit Insurance and Bank Resolution (Državna agencija za osiguranja štednih uloga i sanaciju banaka - hereinafter “the DAB”). The powers of the bank’s governing bodies ceased, and the rights of shareholders were extinguished upon entry into force of the Government Decision. The process of recovery and restructuring of the bank was completed on 13 September 2000.

9.  In 1999 and 2000 five other shareholders of the bank filed four separate petitions for review of the constitutionality and legality (prijedlog za ocjenu ustavnosti i zakonitosti) of the Government Decision. They complained that it violated their constitutional rights as shareholders of the bank. They also argued that the bank had been in good standing and that the Government Decision had therefore been unnecessary.

10.  On 30 January 2003 the Constitutional Court (Ustavni sud Republike Hrvatske) discontinued the proceedings because the legislation on which the Government Decision had been based had in the meantime been repealed.

 

II.     Civil proceedings in the first applicant’s case

A.    Application no. 46998/15

11.  On 2 May 2005 the first applicant’s legal predecessor, the C. company, brought a civil action in the Zagreb Commercial Court (Trgovački sud u Zagrebu) against the bank and the DAB, asking the court to (a) issue a declaratory judgment confirming that the company was still the owner of 17,603 shares, (b) order the DAB to transfer the corresponding number of shares from its portfolio to the company and (c) order the bank to record the company as holder of that number of shares in the bank’s register of shareholders. Alternatively, if the court were to dismiss its main claim, the first applicant’s legal predecessor asked for the bank and the DAB to be held jointly and severally liable to pay HRK 3,520,600 in compensation for the value of the shares the company had been deprived of.

12.  During the proceedings, the first applicant’s legal predecessor argued that the Government Decision had been contrary to Article 48 § 1 and Article 49 § 4 of the Constitution, as established by the High Commercial Court (Visoki trgovački sud Republike Hrvatske) in its judgment of 21 December 2004 in another case (see paragraph 32 below).

13.  By a judgment of 14 September 2006, the Zagreb Commercial Court dismissed the company’s principal claim without deciding its alternative claim (see paragraph 11 above).

14.  By a judgment of 10 February 2010, the High Commercial Court partly dismissed an appeal by the first applicant’s legal predecessor and upheld the first-instance judgment as concerned the principal claim. It however allowed the appeal and remitted the case to the first-instance court in the part concerning the alternative claim.

15.  By a decision of 5 October 2011, the Supreme Court (Vrhovni sud Republike Hrvatske) dismissed an appeal on points of law lodged by the first applicant against the High Commercial Court’s judgment in the part dismissing the principal claim. That court held that the Government Decision had been an administrative act and that the first applicant could have challenged it by instituting judicial review proceedings before the Administrative Court.

16.  On 16 February 2012 the first applicant lodged a constitutional complaint against that decision, relying on Article 29 § 1, Article 48 § 1 and Article 49 § 4 of the Constitution, which guarantee the right to a fair trial, the right of ownership and the protection of rights acquired through the investment of capital (see paragraph 32 below).

17.  By a decision of 22 April 2015, the Constitutional Court dismissed the first applicant’s constitutional complaint and on 28 April 2015 its decision was served on the first applicant’s representative.

18.  That court examined the case under Article 29 § 1 of the Constitution and, referring to its findings in case no. U‑III‑736/2005 (see paragraph 32 below), found no violation of that right.

B.    Application no. 24312/16

19.  Meanwhile, by a judgment of 6 May 2010, adopted in a separate set of proceedings, the Zagreb Commercial Court dismissed the first applicant’s legal predecessor’s alternative claim (see paragraphs 11 and 13 above). It found that the bank and the DAB were not liable for the damage that the first applicant had sustained by the revocation and cancellation of its shares since they had been acting in accordance with the Government Decision (see paragraph 8 above). The shares had not therefore been revoked and cancelled arbitrarily by a wrongful act of the defendants.

20.  By a judgment of 6 May 2014, the High Commercial Court dismissed an appeal by the first applicant and upheld the first-instance judgment, endorsing the reasons given therein. It also held that the Constitutional Court had been the only competent authority to review the conformity of the Government Decision with the Constitution.

21.  By a decision of 24 March 2015, the Supreme Court dismissed an appeal on points of law lodged by the first applicant against the High Commercial Court’s judgment.

22.  On 7 July 2015 the first applicant lodged a constitutional complaint against that decision, relying on Article 29 § 1, Article 48 § 1, Article 49 § 4 and Article 50 § 1 of the Constitution (see paragraph 32 below).

23.  By a decision of 2 December 2015, the Constitutional Court dismissed the first applicant’s constitutional complaint. As concerns the alleged breach of Article 29 § 1 of the Constitution (see paragraph 32 below), it referred to its findings in its decision of 22 April 2015 (see paragraph 17 above) and found no violation of that right. It also found that the first applicant’s complaints under Article 48 § 1, Article 49 § 4 and Article 50 § 1 of the Constitution (see paragraph 32 below) did not disclose any violation of the constitutional rights guaranteed by those provisions.

24.  The Constitutional Court’s decision was served on the first applicant’s representative on 18 December 2015.

III.   civil proceedings in the second applicant’s case

25.  On 3 July 2003 the second applicant brought a civil action in the Zagreb Commercial Court against the bank and the DAB, asking the court to (a) issue a declaratory judgment confirming that she was still the owner of 316 shares, (b) order the DAB to transfer the corresponding number of shares from its portfolio to her and (c) order the bank to record her as holder of that number of shares in the bank’s register of shareholders. Alternatively, if the court were to dismiss her principal claim, the second applicant asked for the bank and the DAB to be held jointly and severally liable to pay her HRK 31,600 in compensation for the value of the shares she had been deprived of.

26.  During the proceedings, the second applicant argued that the Government Decision which had deprived her of her shares had been unconstitutional.

27.  After two remittals, on 7 March 2012 the Zagreb Commercial Court dismissed the second applicant’s action in full.

28.  By a judgment of 18 June 2013, the High Commercial Court dismissed an appeal by the second applicant and upheld the first-instance judgment. It found that restitution of the shares was impracticable since the bank had cancelled them in accordance with the Government Decision and the entire share capital had been used to write off losses. As to the compensation claim, the court held that the second applicant had failed to prove that the defendants had committed a wrongful act which had caused her damage. In that connection, it established that the defendants had acted in accordance with the Government Decision - an administrative act constituting subordinate legislation of a general character. The second applicant could have therefore challenged that act by instituting judicial review proceedings before the administrative courts. Moreover, she could have challenged the decision appointing a temporary administrator to the bank (see paragraph 6 above), an opportunity which she had failed to avail herself of.

29.  On 4 October 2013 the second applicant lodged a constitutional complaint against that judgment, relying, inter alia, on Article 29 § 1, Article 48 § 1, Article 49 § 4 and Article 50 § 1 of the Constitution (see paragraph 32 below).

30.  By a decision of 9 July 2015, the Constitutional Court dismissed the second applicant’s constitutional complaint and on 27 July 2015 its decision was served on the second applicant’s representative.

31.  The court examined the case under Article 29 § 1 of the Constitution (see paragraph 32 below) and found no violation of that right, establishing that by adopting the judgment in the second applicant’s case the High Commercial Court had not departed from its earlier case-law.

RELEVANT LEGAL FRAMEWORK AND PRACTICE

32.  The relevant domestic law and practice is set out in Project-Trade d.o.o. v. Croatia (no. 1920/14, §§ 20-36, 19 November 2020).

THE LAW

I.        JOINDER OF THE APPLICATIONS

33.  Having regard to the similar subject matter of the applications, the Court finds it appropriate to examine them jointly in a single judgment.

II.     ALLEGED VIOLATIONS OF ARTICLE 6 § 1 OF THE CONVENTION ON ACCOUNT OF THE LACK OF ACCESS TO A COURT AND OF ARTICLE 1 OF PROTOCOL No. 1

34.  The applicants complained that, on the basis of the Government Decision of 23 September 1999, they had been deprived of their shares without compensation. They further complained that the Government Decision had been unconstitutional and that the domestic courts had refused to examine its conformity with the Constitution and relevant primary legislation. They relied on Article 6 § 1 of the Convention and Article 1 of Protocol No. 1, the relevant parts of which read as follows:

Article 6

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

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.

...”

A.    Admissibility

1.     The parties’ arguments

(a)    The Government

35.  The Government disputed the admissibility of both complaints, arguing that the applicants had not properly exhausted domestic remedies.

36.  They argued that the applicants had had an effective remedy for the protection of their constitutional and Convention rights but had instituted the incorrect type of civil proceedings, which had meant that the crux of their complaint concerning a violation of their constitutional rights had not and could not have been examined.

37.  The Government submitted that once the bank’s recovery and restructuring process initiated by the Government Decision had been completed on 13 September 2000 (see paragraph 8 above), and after the Constitutional Court had on 30 January 2003 discontinued the proceedings to review the constitutionality and legality of the Government Decision (see paragraph 10 above), its legal effects had become irreversible. The former shareholders, who had considered that their rights had been violated, could only have sought compensation from the State under the general rules of civil and company law. However, the applicants had not brought a civil action against the State but against the bank and the DAB. They had sought restitution of their shares, which had been impracticable because the shares had been cancelled and no longer existed (see paragraph 8 above). As to their alternative compensation claims, the Government argued that those had also been misconceived because the bank and the DAB had merely implemented the Government Decision adopted by the State and could not have been held liable for any pecuniary damage suffered by the applicants.

(b)    The applicants

38.  The first applicant contended that it had instituted proceedings against the bank and the DAB on the basis of the Court’s findings in Batinović and Point Trade, d.o.o. v. Croatia ((dec.), no. 30426/03, 10 July 2007) and Miljenko Kovač v. Croatia ((dec.), no. 39739/06, 15 January 2009). Both applicants argued that a compensation claim against the State would have been an effective remedy only if the Constitutional Court had reviewed the Government Decision and found it unconstitutional. Given that that court had discontinued the relevant abstract constitutional review proceedings (see paragraph 10 above), the remedy suggested by the Government had not been one which they should have used. The second applicant also submitted that she had in essence lodged a compensation claim against the State by lodging it against the DAB, an agency entirely owned by the State.

2.     The Court’s assessment

39.  The Court notes that it has already dismissed a similar objection as to admissibility raised by the Government in Project-Trade d.o.o. (cited above, §§ 48-59). It sees no reason to hold otherwise in the present case.

40.  The Court further notes that these complaints are neither manifestly ill-founded within the meaning of Article 35 § 3 (a) and 4 of the Convention nor inadmissible on any other grounds. They must therefore be declared admissible.

B.    Merits

41.  The Court notes that it has already found a violation of Article 6 § 1 of the Convention on account of the lack of access to a court and of Article 1 of Protocol No. 1 in a case raising similar issues to the present one (see Project-Trade d.o.o., cited above, §§ 62-88).

42.  Having examined all the material submitted to it, the Court considers that the Government have not put forward any fact or argument capable of persuading it to reach a different conclusion in the present case.

43.  There has accordingly been a breach of Article 6 § 1 of the Convention and Article 1 of Protocol No. 1.

III.   ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION on account of inadequate reasoning

44.  When giving notice of the applications to the Government, the Court considered that the applicants’ complaints should also be examined under Article 6 § 1 of the Convention on account of the inadequate reasoning of the Constitutional Court’s decisions because that court had examined the applicants’ constitutional complaints in the light of Article 29 § 1 of the Constitution and not in the light of the Articles on which the applicants had actually relied (see paragraphs 18, 23 and 31 above).

45.  However, having regard to the facts of the case and its findings under Article 6 § 1 of the Convention concerning access to a court and those under Article 1 of Protocol No. 1 (see paragraphs 41-43 above), the Court considers that it has addressed the main legal questions raised in the present applications and that it is not necessary to examine the admissibility and merits of this remaining complaint (see Project-Trade d.o.o., cited above, § 106 and the cases cited therein).

IV.  APPLICATION OF ARTICLE 41 OF THE CONVENTION

46.  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

1.     The parties’ submissions

47.  The first applicant claimed 466,692 euros (EUR) in respect of pecuniary damage corresponding to the value of shares of which it had been deprived. It also claimed EUR 10,000 in respect of non-pecuniary damage. The second applicant claimed EUR 4,200 in respect of pecuniary damage corresponding to the value of shares of which she had been deprived, together with an unspecified amount of statutory default interest accrued on that amount from 3 December 1997. She also claimed EUR 3,000 in respect of non-pecuniary damage.

48.  The Government argued that, should the Court find a violation, the applicants would be entitled to obtain a reopening of the domestic proceedings in which the domestic courts would be able to decide their pecuniary claims. In the alternative, the Government contested those claims as unfounded, arguing that the applicants had not suffered any damage on account of the cancellation of their shares, and had furnished no evidence as to the existence of the damage or as to quantum.

49.  The Government also contested the applicants’ claims for non‑pecuniary damage. As regards the first applicant, the Government argued that as a commercial company it could not have suffered non‑pecuniary damage; as to the second applicant, they deemed her claim excessive and unsubstantiated.

2.     The Court’s assessment

(a)    Pecuniary damage

50.  The Court reiterates that in the present case it has found violations of Article 6 § 1 of the Convention on account of the lack of access to a court, as well as violations of Article 1 of Protocol No. 1 on account of the breach of the State’s procedural obligations under that Article (see paragraphs 41‑43 above). While the applicants’ shares were indeed revoked and cancelled by the Government Decision (see paragraph 8 above), the Court cannot speculate as to what the eventual result might have been if the applicants had been able to challenge that decision in an effective manner in proceedings that had been in compliance with the requirements of Article 6 § 1 of the Convention and the State’s procedural obligations under Article 1 of Protocol No. 1 (see Project-Trade d.o.o., cited above, § 110).

51.  In these circumstances, having regard to the possibility under domestic law for the applicants to request the reopening of the proceedings at issue (see paragraph 32 above), and given that those proceedings concern the remedy the Government in earlier similar cases argued to have been effective ( see Project-Trade d.o.o., cited above, §§ 49-53), the Court rejects this claim (ibid., § 111).

(b)    Non-pecuniary damage

52.  The Court finds that the applicants must have suffered non‑pecuniary damage which cannot be compensated for solely by the finding of a violation, it being understood that a legal person, even a commercial company, may also sustain non-pecuniary damage (see Comingersoll S.A. v. Portugal [GC], no. 35382/97, §§ 31-37, ECHR 2000‑IV). Making its assessment on an equitable basis, the Court awards EUR 3,750 to the first applicant and EUR 3,000 to the second applicant in respect of non-pecuniary damage.

B.    Costs and expenses

53.  The first applicant also claimed EUR 24,233.12 and the second applicant EUR 6,000 for the costs and expenses incurred before the domestic courts and before the Court.

54.  The Government contested those claims as excessive and unsubstantiated because they had been lodged without any supporting documents.

55.  As to the costs and expenses incurred before the domestic courts, regard being had to the documents in its possession and to its case-law, the Court considers it reasonable to award the sum of EUR 1,656 to the first applicant and EUR 845 to the second applicant for the costs incurred in the proceedings before the Constitutional Court. As regards the remainder of their claims for costs and expenses incurred before the domestic courts, the Court is of the opinion that those claims must be rejected, given that the applicants will be able to have those costs reimbursed should the proceedings complained of be reopened (see, for example, Stojanović v. Croatia, no. 23160/09, § 84, 19 September 2013).

56.  As to the costs incurred before the Court, regard being had to the documents in its possession and to its case-law, the Court considers it reasonable to award the sum of EUR 2,485 to the first applicant and EUR 1,690 to the second applicant.

C.    Default interest

57.  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.      Decides to join the applications;

2.      Declares the applications admissible;

3.      Holds that there has been a violation of Article 6 § 1 of the Convention on account of the lack of access to a court;

4.      Holds that there has been a violation of Article 1 of Protocol No. 1;

5.      Holds that there is no need to examine the admissibility and merits of the complaint under Article 6 § 1 of the Convention concerning inadequate reasoning;

6.      Holds,

(a)  that the respondent State is to pay the applicants, 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 3,750 (three thousand seven hundred and fifty euros) to the first applicant and EUR 3,000 (three thousand euros) to the second applicant, plus any tax that may be chargeable, in respect of non-pecuniary damage;

(ii) EUR 4,141 (four thousand one hundred and forty-one euros) to the first applicant and EUR 2,535 (two thousand five hundred and thirty-five euros) to the second applicant, plus any tax that may be chargeable to them, 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;

7.      Dismisses the remainder of the applicants’ claims for just satisfaction.

Done in English, and notified in writing on 2 December 2021, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

  Attila Teplán                                                           Krzysztof Wojtyczek
    Acting Deputy Registrar                                                President

 

APPENDIX

 

No.	Application no.	Lodged on	Applicant Date of registration/Year of birth Registered address/ Place of residence	Represented by
1.	46998/15	14/09/2015	Scott Bader d.o.o. 1992 Zagreb	Nebojša ANTOLIĆ
2.	6919/16	26/01/2016	Mihajla MILETIĆ 1947 Slavonski Brod	Tatjana PRACNY NOVAK
3.	24312/16	25/04/2016	Scott Bader d.o.o. 1992 Zagreb	Nebojša ANTOLIĆ