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FIFTH
SECTION
CASE OF DIYA 97 v. UKRAINE
(Application
no. 19164/04)
JUDGMENT
STRASBOURG
21 October
2010
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 Diya 97 v. Ukraine,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Peer Lorenzen, President,
Karel
Jungwiert,
Rait Maruste,
Mark
Villiger,
Isabelle Berro-Lefèvre,
Mirjana
Lazarova Trajkovska,
Ganna Yudkivska, judges,
and
Claudia Westerdiek, Section
Registrar,
Having
deliberated in private on 28 September 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 19164/04) against Ukraine
lodged with the Court under Article 34 of the Convention for the
Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by a Ukrainian company with foreign capital, ‘Diya
97’ (“the applicant company”), on 9 March 2004.
- The
applicant company was represented by Mr A. Mamalyga, a lawyer
practising in Kyiv. The Ukrainian Government (“the Government”)
were represented by their Agent, Mr Y. Zaytsev.
- The
applicant company alleged in particular that its right to a fair
trial had not been respected in the course of the first set of
proceedings against the State bailiffs.
- On
4 November 2009 the President of the
Fifth Section decided to give notice of the application to the
Government. It was also decided to examine the merits of the
application at the same time as its admissibility (Article 29 §
1).
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
applicant company is a legal entity registered under Ukrainian law
with its office in Kyiv.
A. The applicant company’s claims against the
company Yu. and the first set of proceedings
- On
17 May 2001 a company Yu. (“Yu.”), pledged in favour of
the applicant company real estate located in the town of Yevpatoriya
(“the real estate”). The pledge was notarised and
provided that in the event of default by Yu. under the main agreement
the applicant company could request a notary to issue a writ of
execution regarding the real estate.
- On
4 July 2001, following the applicant company’s request, the
notary issued a writ of execution ordering that the real estate be
sold by the State bailiffs at public auction and the applicant
company’s claims be satisfied from the funds received.
- On
11 July 2001 the Yevpatoriya Department of the State Bailiffs’
Service (“the Bailiffs”) instituted enforcement
proceedings in respect of the writ of execution.
- On
7 May 2002 the Commercial Court of the Autonomous Republic of Crimea
ordered that Yu. pay 171,728.86 Ukrainian hryvnias (UAH) to the
applicant company. The Bailiffs instituted separate enforcement
proceedings in respect of that judgment.
- On
6 June 2002 the Bailiffs joined the enforcement proceedings in
respect of the writ of execution and the judgment.
- On
12 September 2002 the Bailiffs, having failed to sell the real estate
at public auction, transferred its ownership to a company, M. (“M.”),
which was one of the other creditors of Yu. The applicant company
challenged those acts of the Bailiffs.
- On
3 December 2002 the Commercial Court of the Autonomous Republic of
Crimea declared the applicant company’s complaint against the
Bailiffs inadmissible. The court noted that the complaint had been
time barred and, in view of Article 121-2 of the Code of
Commercial Procedure (“the CCP”), could not be considered
by the commercial courts, since it raised the issue of the allegedly
inappropriate enforcement of a notary’s writ of execution,
which was outside the competence of the commercial courts.
- On
12 February 2003 the Sevastopol Commercial Court of Appeal (“the
Commercial Court of Appeal”), considering the applicant
company’s appeal, decided that the complaint had been lodged in
time but endorsed the conclusion of the first-instance court that the
commercial courts had no jurisdiction over the complaint. The
applicant company appealed in cassation against that resolution.
- On
13 May 2003 the Higher Commercial Court imposed an interim measure,
by which it attached the real estate pending consideration of the
case.
- On
19 May 2003 the Higher Commercial Court quashed the resolution of 12
February 2003 as unsubstantiated and remitted the case to the
Commercial Court of Appeal for fresh consideration.
- On
23 June 2003 the Commercial Court of Appeal
found that the commercial courts did have jurisdiction over the
applicant company’s complaint, since the enforcement
proceedings in question also concerned a judgment of a commercial
court (namely, the judgment of 7 May 2002). It further declared the
decision of the Bailiffs of 12 September 2002 unlawful and
obliged them to sell the real estate at public auction at a reduced
price.
- On
27 October 2003 the Higher Commercial Court quashed the resolution of
23 June 2003, for the reason that the
parties had not been duly informed of the hearing, and remitted the
case to the Commercial Court of Appeal for reconsideration.
- In
the meantime, under the agreements of 11 and 18 September and
2 October 2003 M. sold the real estate to V., a physical person.
- On
22 January 2004 the Commercial Court of Appeal declared the Bailiffs’
decision of 12 September 2002 unlawful and obliged the Bailiffs
to sell the real estate at public auction at a reduced price.
- On
21 April 2004 the Higher Commercial Court upheld the Commercial Court
of Appeal resolution of 22 January 2004.
- On
26 August 2004 the Supreme Court rejected the Bailiffs’
cassation appeal against the Higher Commercial Court resolution of
21 April 2004.
- On
7 October 2004 V. lodged with the Supreme Court a cassation appeal
against the Higher Commercial Court resolution of 21 April 2004. He
asked for the time-limit for his cassation appeal to be extended for
the reason that he had not been aware of the proceedings before 1
October 2004. He further requested that the proceedings be terminated
as the commercial courts had no jurisdiction over the case.
- On
18 November 2004 the Supreme Court gave V. leave to appeal in
cassation and instituted fresh cassation proceedings.
- On
21 December 2004 the Supreme Court, considering V.’s cassation
appeal on the merits, found that the applicant company’s
complaint referred to the allegedly improper enforcement of the
notary’s writ of execution, while the commercial courts could
deal with complaints concerning the enforcement of judgments,
rulings, and resolutions taken exclusively by the commercial courts.
It further held that at that moment the real estate was owned by a
physical person. The Supreme Court therefore found that the case was
outside the competence of the commercial courts, quashed the
resolution of the Higher Commercial Court of 21 April 2004, and
terminated the proceedings in the case.
B. The second set of proceedings
- On
an unspecified date the applicant company instituted proceedings in
the Kyiv Commercial Court against the Bailiffs and the Ministry of
Justice, seeking to invalidate the Bailiffs’ decision of
12 September 2002 and claiming damages.
- On
10 March 2005 the court found that the Bailiffs’ decision of
12 September 2002 was unlawful. It further dismissed the
applicant company’s claims for damages for failure to pay the
required court fees. The applicant company did not appeal against
that judgment. The Bailiffs appealed.
- On
31 August 2005 the Kyiv Commercial Court of Appeal rejected the
Bailiffs’ appeal as time-barred.
- On
29 March 2006 the Higher Commercial Court upheld the Kyiv Commercial
Court of Appeal ruling of 31 August 2005.
- On
18 May 2006 the Supreme Court upheld the Higher Commercial Court
resolution of 29 March 2006.
C. The third set of proceedings
- On
16 August 2006 the applicant company instituted proceedings in the
Kyiv Commercial Court against the Bailiffs, the Ministry of Justice,
and the State Treasury, seeking damages in compensation for the
unlawful decision of the Bailiffs of 12 September 2002.
- On
30 January 2008 the court rejected the applicant company’s
claim as time-barred and unsubstantiated.
- On
10 April 2008 the Kyiv Commercial Court of Appeal upheld the judgment
of 30 January 2008. The applicant company failed to state whether it
had appealed in cassation against the resolution of 10 April 2008.
II. RELEVANT DOMESTIC LAW
Code of Commercial Procedure of 6 November 1991 (as worded at the
material time)
- Article
1 of the CCP provides, inter alia, that legal entities and
citizens who have been registered as private entrepreneurs are
entitled to apply to commercial courts, in accordance with the
relevant jurisdictional rules, for protection of their rights and
interests.
- Under
Article 26 and 27 of the CCP, third parties shall be admitted to
proceedings before a judgment of the first-instance commercial court
has been adopted and shall have the same procedural rights as the
other parties.
- Under
Article 107 and 108 of the CCP the parties to a case and a prosecutor
have the right to appeal in cassation to the Higher Commercial Court
against a judgment of a first-instance commercial court which has
come into effect, and against a resolution of a commercial court of
appeal. A cassation appeal may also be lodged by persons who have not
participated in the proceedings but whose rights and obligations have
been affected by the impugned court decisions.
- Article
111-14 of the CCP states, inter alia, that the parties to a
case and the General Prosecutor have the right to appeal in cassation
to the Supreme Court against a Higher Commercial Court resolution.
- According
to Article 111-16 of the CCP, a Higher Commercial Court resolution
may be appealed in cassation to the Supreme Court within one month of
the date of its adoption. However, if the grounds for appealing in
cassation arose after the expiration of this time-limit, the Supreme
Court shall be obliged to accept the cassation appeal for
consideration.
- Article
121-2 of the CCP provides, inter alia, that complaints about
acts or omissions of the bodies of the State Bailiffs’ Service
concerning the enforcement of judgments, rulings, or resolutions of
the commercial courts can be lodged by the creditor, the debtor, or
the prosecutor within ten days of the date of the impugned measure or
after the above persons have become aware of it, or after the
relevant measure should have been taken.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF
THE CONVENTION
- The
applicant company complained that its right to a fair trial had been
violated by the Supreme Court, which had considered V.’s
cassation appeal without taking into account domestic procedural
rules. The applicant company relied on Article 6 § 1 of the
Convention, which reads, in so far as relevant, as follows:
“In the determination of his civil rights and
obligations ... everyone is entitled to a fair ... hearing ... by [a]
... tribunal ...”
A. Admissibility
- The
Government submitted that Article 6 § 1 of the
Convention was inapplicable under its civil head. In their opinion
the first set of proceedings did not determine any civil rights and
obligations on the part of the applicant company but concerned merely
the lawfulness of the administrative acts of the State authorities.
- The
applicant company contested these submissions. It stated that the
subject matter of the proceedings in question was the Bailiffs’
decision of 12 September 2002 by which the real estate pledged in
favour of the applicant company was transferred from the debtor
company to the other creditor in breach of the applicant company’s
pre-emptive rights. As a result of this administrative decision, the
applicant company’s property rights had been violated.
- The
Court notes that in these proceedings the applicant company sought to
invalidate the Bailiffs’ decision of 12 September 2002 for the
reason that that decision violated its pre-emptive rights concerning
the real estate. The Court considers that those pre-emptive rights
were civil in nature. It follows that Article 6 § 1
of the Convention applies under its civil head and the Government’s
objection should be dismissed.
- The
Court further notes that this complaint is not manifestly ill founded
within the meaning of Article 35 § 3 of the Convention. It notes
that it is not inadmissible on any other grounds. It must therefore
be declared admissible.
B. Merits
- The
applicant company maintained that the Supreme Court could not
consider the cassation appeal lodged by V. They referred to Article
111-14 of the CCP, which provided that a cassation appeal could be
submitted to the Supreme Court only by the parties to the proceedings
or by the General Prosecutor.
- The
Government did not provide any comments as to the merits of the
complaint.
- The
Court reiterates that the right to a fair hearing before a tribunal
as guaranteed by Article 6 § 1 of the Convention must be
interpreted in the light of the Preamble to the Convention, which
declares, in its relevant part, the rule of law to be part of the
common heritage of the Contracting States. One of the fundamental
aspects of the rule of law is the principle of legal certainty, which
presupposes respect for the principle of res judicata, that is
the principle of the finality of judgments (see Ryabykh v. Russia,
no. 52854/99, § 52, ECHR 2003-X).
- The
Court has further held that procedural rules are designed to ensure
the proper administration of justice and compliance with the
principle of legal certainty, and that litigants must be entitled to
expect those rules to be applied. This principle applies both ways,
not only in respect of litigants but also in respect of the national
courts (see, among other authorities, Cañete de Goñi
v. Spain, no. 55782/00, § 36, ECHR 2002 VIII; Gorou
v. Greece (no. 3), no. 21845/03, § 27, 22 June
2006; Miholapa v. Latvia, no. 61655/00, § 24, 31 May
2007; and Andrejeva v. Latvia
[GC], no. 55707/00, § 99, ECHR 2009 ...).
- As
to the present case, the Court observes that in accordance with
Article 111-14 of the CCP, as worded at the relevant time, the
Supreme Court could accept cassation appeals lodged by the parties to
the proceedings or by the General Prosecutor. By virtue of Articles
26 and 27 of the CCP, it could also accept cassation appeals by the
third parties. Unlike the Higher Commercial Court (see paragraph 35
above), the Supreme Court could not accept cassation appeals by any
other persons claiming that their rights had been affected if they
had not been admitted to the proceedings earlier. In this regard the
Court admits that the conditions for admissibility of cassation
appeals to the Supreme Court, which was the fourth level of
jurisdiction in commercial proceedings, might have been stricter than
for the other appeals (see, mutatis mutandis, Levages
Prestations Services v. France, 23 October 1996, §§ 44-45,
Reports of Judgments and Decisions 1996 V).
- It
appears therefore that, in considering the cassation appeal lodged by
V., who had not been admitted to the proceedings previously in any
capacity, the Supreme Court disregarded clear and precise procedural
rules governing the administration of justice which the applicant
company legitimately expected to be observed.
- This
procedural violation is aggravated by the fact that, as a result of
the cassation review, the Supreme Court terminated the entire
judicial process and set at nought the court decisions having, at the
time of review, the effect of res judicata.
- The
Court acknowledges that the interests of V., who allegedly had not
been aware of the proceedings earlier, might have necessitated a
review of the case. However, the procedural
rules did not allow the Supreme Court to act in such a manner. The
Government failed to explain procedural grounds which could justify
the consideration of V.’s cassation appeal by the Supreme
Court. The Court further notes that nothing prevented V. from trying
legitimate avenues to protect his interests, either within the
existing commercial proceedings (by way of applying to the General
Prosecutor for an intervention (a similar course of action has been
analysed by the Court in the recent case of Gorou v. Greece (no.
2) ([GC], no. 12686/03, §§
27-42, ECHR 2009 ...)), or by means of a separate civil action.
- In
view of the foregoing the Court finds that the Supreme Court’s
consideration of V.’s cassation appeal was in breach of the
principle of legal certainty and the applicant company’s right
to a fair trial. There has accordingly been a violation of Article
6 § 1 of the Convention.
II. OTHER ALLEGED VIOLATIONS OF THE CONVENTION
- The
applicant company complained that the enforcement proceedings in its
favour had been conducted incorrectly by the bailiffs and that the
procedure for challenging the bailiffs’ misconduct was
ineffective. It relied on Article 13 of the Convention. The applicant
company further complained under Article 6 § 1 of the Convention
that the first set of proceedings had lasted too long.
- Having
considered the applicant company’s submissions in the light of
all the material in its possession, the Court finds that, in so far
as the matters complained of are within its competence, they do not
disclose any appearance of a violation of the rights and freedoms set
out in the Convention.
- It
follows that this part of the application must be declared
inadmissible as manifestly ill-founded, pursuant to Article 35 §§
3 and 4 of the Convention.
III. 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 claimed 256,338.79 euros (EUR) in respect of
pecuniary damage.
- The
Government submitted that the claim was unsubstantiated.
- The
Court notes that if the decision in favour of the applicant company
had not been quashed by the Supreme Court in the course of the first
set of proceedings, the Bailiffs would have to proceed with the
public auction trying to sell the real estate in question. However,
at the material time the real estate had been sold to V. (see
paragraphs 18 – 21 above). Moreover, even assuming there had
been no involvement of V.’s property interests, the outcome of
the enforcement proceedings would be unknown as it would be dependant
on many factors, including the success of the public auction. The
Court further notes that the applicant company failed to submit any
estimations of the price for which the real estate could be
reasonably sold at the relevant time. In view of the above, the Court
considers that the claim for pecuniary damage is unsubstantiated. It
therefore rejects the claim.
B. Costs and expenses
- The applicant company did not submit any claim under
this head. The Court therefore makes no award.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Declares the complaint under Article 6 § 1
of the Convention (concerning lack of fairness in the cassation
proceedings instituted by V. in October 2004) admissible and the
remainder of the application inadmissible;
- Holds that there has been a violation of Article
6 § 1 of the Convention;
- Dismisses the applicant company’s claim
for just satisfaction.
Done in English, and notified in writing on 21 October 2010, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
