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FIFTH
SECTION
CASE OF DRUZSTEVNÍ ZÁLOZNA PRIA AND OTHERS
v. THE CZECH REPUBLIC
(Application
no. 72034/01)
JUDGMENT
(Just
satisfaction)
STRASBOURG
21
January 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 DruZstevní záloZna Pria and Others v.
the Czech Republic,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Peer Lorenzen, President,
Renate
Jaeger,
Karel Jungwiert,
Rait Maruste,
Mark
Villiger,
Isabelle Berro-Lefèvre,
Zdravka
Kalaydjieva, judges,
and
Claudia Westerdiek, Section
Registrar,
Having
deliberated in private on 15 December 2009,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The case originated in an application (no. 72034/01)
against the Czech Republic lodged with the Court under Article 34 of
the Convention for the Protection of Human Rights and Fundamental
Freedoms (“the Convention”) by DruZstevní záloZna
Pria, a credit union, and eight other applicants, Mr Jiří
Medek, Mr František Zoubek, Mr Vladimír Olšaník,
Mr Karel Pospíšil, Mrs Dagmar Kousalová, Mr
Josef Frommel, Mrs Ludmila Kramolišová and Mrs
Jiřina Solaříková, members of the credit
union and of its management and supervisory organs, on 26 March 2001.
In the course of the proceedings before the Court, 633 individuals,
members of the credit union joined the proceedings. The first
applicant is a legal entity with registered seat in Brno (hereinafter
“the applicant credit union”) created under the Credit
Unions Act (zákon o spořitelních a uvěrních
druZstvech – “the Act”). Its
incorporation became effective on 23 August 1995. The
individuals are Czech nationals.
- In
a judgment delivered on 31 July 2008 (“the principal
judgment”), the Court held that there had been a violation of
Article 6 of the Convention and Article 1 of Protocol No. 1 in
respect of the applicant credit union. It further held that it was
not necessary to rule on the allegation of a violation of Article 13
of the Convention and declared inadmissible all complaints of the
individual applicants (DruZstevní záloZna Pria and
Others v. the Czech Republic, no. 72034/01, 31 July 2008 “the
principal judgment”).
- Under
Article 41 of the Convention the applicants sought just satisfaction
of restitution in integrum or the compensation of the material
and immaterial damage sustained and reimbursement of costs and
expenses incurred.
- Since
the question of the application of Article 41 of the Convention was
not ready for decision, the Court reserved it and invited the
Government and the applicant to submit, within three forthcoming
months, their written observations on that issue and, in particular,
to notify the Court of any agreement they might have reached (ibid.,
§§ 118-119, and point 5. of the operative provisions).
- The
parties did not come to terms on the question of just satisfaction.
The applicant credit union and the Government each filed
observations.
THE LAW
- 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 credit union provided a detailed account of the assets it
allegedly held when the receivership had been imposed. It also stated
that the receiver had mismanaged its property, inflicted damage on
it, and that because of the winding-up order it had been deprived of
the possibility of administering its property and operating its
business. The applicant credit union argued that it could not obtain
reparation for the violations in the domestic courts, and requested
to be put in the position in which it would have been, had the found
violations of the Convention not taken place. It relied in this
respect on an expert report attached to its submissions of 4 April
2006, where its assets were evaluated at CZK 528,279,840
(EUR 19,609,497). It invited the Court to take into
consideration that it was deprived of the chance to establish the
illegality of the imposition of the receivership as the documents
necessary were seized by the State. According to the reports at its
disposal, the applicant credit union was generating profit the day
the receivership was imposed, and there was no legal ground to
subject it to the receivership. It further contended that it still
could not effectively seek a remedy in respect of the sustained
losses in the domestic courts as its business and accountancy
documents remained seized. It further emphasized that three quarters
of any just satisfaction awarded by the Court would not be eventually
paid to its members but to the State, since it is the creditor who
vindicated three quarters of all claims filed within the bankruptcy
proceedings.
- The
Government submitted that there was no causal link between the
imposition of the receivership and the pecuniary damage claimed. They
maintained that neither compensation for pecuniary damage, nor just
satisfaction for violations should be granted. The Government relied
on an expert opinion of PricewaterhouseCoopers Česká
republika, s.r.o. commissioned by them for the purposes of the
present case. According to the report, the market value of the
applicant credit union as at 11 January 2000, i.e.
immediately before the receivership came into effect, was CZK 0.0.
The credit union was thus not able to continue its existing business
activities in the long term. The report did not identify any mistake
from an economic perspective made by the receiver, and disagreed with
the findings embodied in expert opinions submitted by the applicant
credit union. The applicant credit union’s actions for damages
against the State are still pending as on 26 April 2007 the Supreme
Court remitted the case to the court of first instance for further
consideration. The Government emphasized that the poor economic
standing of the applicant credit union was the consequence of
mismanagement by the executives in place prior to the imposition of
the receivership. They consider the claim for just satisfaction
absurd, given the fact that the State paid from its deposit-insurance
scheme approximately CZK 294 million to the members of the applicant
credit union in compensation for losses sustained in consequence of
the mismanagement of the applicant credit union prior to the
receivership.
- The
Court observes that the violations found in the principal judgment
stemmed from the denial by the receiver of access to the applicant
credit union’s business and accountancy papers under Article 1
of Protocol No. 1, and from a lack of adequate judicial review of the
imposition of the receivership under Article 6 of the Convention (see
the principal judgment, §§ 94-95 and 113-115, 31 July
2008). The Court did not find a violation of the Convention in the
making of the receivership order as such, and indeed expressly found
that “the taking of control of the ... business could ... be
regarded as falling within [the State’s] margin of
appreciation” (see the principal judgment, § 90). It
follows that no causal link has been established between the
violations of Article 6 § 1 of the Convention and Article 1 of
Protocol No. 1 found in the present case, on the one hand, and the
imposition of the receivership on the other. Whilst the imposition of
the receivership might well have had adverse financial consequences
for the credit union, the Court cannot speculate as to what the
eventual economic standing of the applicant credit union might have
been, had it been able to challenge the imposition of those measures
in proceedings compatible with Article 6 of the Convention and
Article 1 of Protocol No. 1 (see, mutatis mutandis, Capital
Bank AD v. Bulgaria, no. 49429/99, § 144, ECHR 2005 XII
(extracts); Tre Traktörer AB, p. 25, § 66, Fredin
(no. 1), p. 20, § 65; and Credit and Industrial
Bank, § 88, all cited above).
- As
regards the claims of the applicant credit union asserting losses
caused by the mismanagement of the appointed receiver, a matter which
the Court in its principal judgment reserved to its consideration of
Article 41 of the Convention (§ 86), the Court notes that an
action for damages in this respect is still pending before the
domestic courts (see paragraph 8 above), and there is no reason to
consider that the domestic action will not address the relevant
issues. In any event, the damage referred to in the applicant union’s
claims does not flow from the violations which the Court has found,
but from the making - and implementation - of the receivership order
itself. These claims are therefore also not connected to the
violation, and do not call for an award under Article 41 of the
Convention.
No
award is therefore made under this head.
B. Costs and expenses
- The
applicant credit union claimed CZK 1,333,083.80 (EUR 49,465) as
reimbursement of its legal costs. It submitted that the costs
consisted of CZK 525,000 for an expert report assessing its loss
suffered in the period from 12 January 2000 to 31 December 2001; CZK
128,110 for legal representation in the proceedings whereby the
extension of receivership on 12 July 2001 was contested; and the
remainder for the costs and expenses of the counsel before the Court,
representing 212 billable hours charged by tariffs within the range
of CZK 2,500 – 4,000 (EUR 98 – 157). It further claimed
the costs of the domestic proceedings in damages and the proceedings
on the appointment of the liquidator. It maintained that part of the
costs was discharged by L. V. P., spol. s r. o. and AZ STAVBA, s. r.
o., legal entities different from it, due to the bankruptcy. It
specified that the funds were in fact raised among its members and
formally paid by those entities.
- The
Government found those sums excessive, estimating that the applicant
credit union should be entitled to a reimbursement of costs that
would not exceed EUR 5000. Moreover, they expressed their doubts
whether the legal costs put forward in the application were in fact
incurred by the applicant credit union, given the fact that they were
paid by two legal entities different from the applicant credit union.
Unless it is established that those costs were paid by those entities
in order to remedy the breaches of the Convention’s rights of
the applicant credit union, this part of the claim should be in the
Government’s view rejected.
- The
Court notes that no casual link between the violations found in the
principal judgment and the loss purportedly incurred from
12 January 2000 to 31 December 2001 has been established.
Therefore, it considers that the costs of the expert report assessing
that loss should not be reimbursed.
- Regarding
the proceedings on the action in damages and on the appointment of
the liquidator respectively, the subject matter of those proceedings
did not encompass the applicant credit union’s right in respect
of which the violations were found. It ensues that the costs incurred
in those proceedings were not spent in the attempt to remedy in
domestic courts the breaches established of its Convention rights
and, accordingly, should not be reimbursed.
- By
contrast, the sum of CZK 128,110 (EUR 5,028) for legal representation
in the domestic proceedings whereby the extension of the receivership
of 12 July 2001 had been contested was incurred in the course of the
proceedings in which the applicant credit union sought protection of
its Convention rights. Given the complexity of the case, the subject
matter of the proceedings, the number of instances hearing the case,
and the evidence submitted in this regard, the Court considers the
sum reasonable in quantum and grants it in full.
- As
for the costs incurred in pursuing the application at hand, the
Court, having regard to the complexity and volume of the present
case, considers the billable hours put forward by the applicant
credit union to reflect properly the needs of proper legal
representation of the applicant credit union. It cannot, nonetheless,
disregard that evidence adduced in this respect comprises also items,
such as costs of media consulting and analyzing, which are not
related to legal counselling and thus cannot be subsumed under any
category of costs and expenses reimbursable under this head.
Furthermore, some items, such as costs of copying, do not seem to be
reasonable as to quantum. As to the assertion that the costs were
paid in part not by the applicant credit union, it is true that
according to invoices submitted to the Court some payments to the
legal counsel had been discharged by L. V. P., spol. s r. o. and AZ
STAVBA, s. r. o., legal entities different from the applicant credit
union. However, the description of legal services provided in those
invoices suggests that the payments were made in order to assure the
legal representation before the Court. Having regard to the fact that
the content of those invoices was not disputed, the Court considers
it appropriate to reimburse the applicant credit union CZK 499,081.59
(EUR 19,587) for the legal costs and expenses incurred in the course
of the proceedings before it.
- It
ensues that the Court awards to the applicant credit union under this
head in total CZK 627,191.59 (EUR 24,615).
C. Default interest
- The
Court considers it appropriate that the default interest 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
- Holds
(a) that
the respondent State is to pay the applicants, within three months
from the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, EUR 24,615
(twenty four thousand six hundred and fifteen euros) in respect of
costs and expenses, plus any tax that may be chargeable to the
applicants; the amount to be converted into Czech korunas at the rate
applicable at the date of settlement;
(b) that
from the expiry of the above-mentioned three months until settlement
simple interest shall be payable on the above amount at a rate equal
to the marginal lending rate of the European Central Bank during the
default period plus three percentage points;
- Dismisses the remainder of the applicants’
claim for just satisfaction.
Done in English, and notified in writing on 21 January 2010, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
