THIRD SECTION

CASE OF KIM AND RYNDINA v. RUSSIA

(Applications nos. 22094/05 and 20813/08)

JUDGMENT

STRASBOURG

17 January 2017

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

In the case of Kim and Ryndina v. Russia,
The European Court of Human Rights (Third Section), sitting as a Committee composed of:
	Helena Jäderblom, President,
	Dmitry Dedov,
	Branko Lubarda, judges,
and Fatoş Aracı, Deputy Section Registrar,
Having deliberated in private on 13 December 2016,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1.  The case originated in two applications (nos. 22094/05 and 20813/08) 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 two Russian nationals, Mr Sergey Nikolayevich Kim and Mrs Lyudmila Mikhaylovna Ryndina (“the applicants”), on 27 April 2005 and 16 January 2008 respectively.
2.  The Russian Government (“the Government”) were represented by Mr G. Matyushkin, Representative of the Russian Federation to the European Court of Human Rights.
3.  On 16 May 2011 the applications were communicated to the Government.
THE FACTS
Article I.	I.  THE CIRCUMSTANCES OF THE CASE
4.  The first applicant was born in 1964 and lives in Korsakov, Sakhalin Region. The second applicant was born in 1948 and lives in Moscow.
5.  The applicants sued the Trest Zhilishchnogo Hozyajstva municipal company (МП «Трест жилищного хозяйства» – hereinafter “the municipal company”) in two unrelated sets of civil proceedings.
Section 1.01	A.  Judgments in the applicants’ favour
6.  On 22 January 2003 the Korsakovskiy Town Court of the Sakhalin Region (hereinafter “Town Court”) granted the claim by the first applicant for salary arrears and ordered the municipal company to pay him 1,270 euros (EUR). The judgment became final on the same date, but remained unenforced.
7.  On 1 March 2004 the Town Court granted the claim by the second applicant for compensation for the damage to her health sustained as a result of the acts of one of the municipal company’s employees. The court awarded the applicant EUR 16,256. The judgment became final on 25 May 2004. It was partly enforced in 2004 and in 2006-07; the applicant received EUR 11,888.
8.  On 7 May 2007, in the course of insolvency proceedings in respect of the municipal company, the Commercial Court of the Sakhalin Region (hereinafter “the Commercial Court”) granted the second applicant’s claim for compensation of lost income and dismissed the remainder of the applicant’s claims. She was awarded EUR 44,044. The second applicant appealed. On 18 July 2007 the Commercial Court discontinued the appeal proceedings on the grounds that the municipal company had been liquidated. The Commercial Court relied on Articles 49 § 3 and 63 § 8 of the Civil Code of Russia as interpreted by the Plenary Supreme Commercial Court in Ruling No. 29 of 15 December 2004 (see paragraphs 13-14 below).
Section 1.02	B.  Available information on the municipal company
9.  The municipal company was incorporated as a municipal unitary company set up by a decision of the local authority and provided heating supply and maintenance services in respect of municipal housing. The municipal company had “the right of economic control” (право хозяйственного ведения) over the assets allocated to it by the local authority in order to carry out its statutory activities.
10.  According to the second applicant, on 27 April 2002 the local authority withdrew most of the assets from the municipal company’s economic control. The assets were subsequently transferred to a newly created company; the debts remained with the municipal company.
11.  On 27 September 2005 the municipal company was declared insolvent and it was put into liquidation. On 7 May 2007 the Commercial Court ended the liquidation proceedings.
Article II.	II.  RELEVANT DOMESTIC LAW
12.  The domestic provisions relevant to the cases on the legal status of State and municipal unitary companies with the right of economic control are summarised in Liseytseva and Maslov v. Russia (nos. 39483/05 and 40527/10, §§ 54-127, 9 October 2014), and Samsonov v. Russia ((dec.) no. 2880/10, 18 September 2014).
13.  Pursuant to Article 49 § 3 of the Civil Code of Russia (as in force at the material time), the legal capacity of a legal entity ceases when an entry is made on its exclusion from the State Register of Legal Entities (Единый государственный реестр юридических лиц – hereinafter “the State Register”). Pursuant to Article 63 § 8 of the same Code, the liquidation of the legal entity shall be regarded as completed and the legal entity as having ceased to exist after an entry to this effect has been made in the State Register.
14.  On 15 December 2004 the Plenary Supreme Commercial Court in Ruling no. 29 § 48 specified that as of the date on which the entry concerning liquidation of a legal entity is made in the State Register, a commercial court shall discontinue all the proceedings.
THE LAW
Article III.	I.  JOINDER OF THE APPLICATIONS
15.  Given that the present applications raise similar issues under the Convention, the Court decides join them pursuant to Rule 42 § 1 of the Rules of Court.
Article IV.	II.  ALLEGED VIOLATION OF ARTICLES 6 AND 13 OF THE CONVENTION AND ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION
16.  The applicants complained of the non-enforcement of domestic decisions given in their favour and of the lack of any effective remedy in domestic law. They relied on Article 6 § 1 and Article 13 of the Convention and on Article 1 of Protocol No. 1 to the Convention, 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 13
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
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.
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.”
Section 4.01	A.  Submissions by the parties
(a)	1.  The Government
17.  The Government argued that the unitary companies in question were commercial organisations that operated independently from the authorities. They accordingly submitted that the debts of municipal unitary companies were not attributable to the State.
18.  The Government further claimed that Mr Kim had failed to exhaust the domestic remedies. In particular, he had not submitted his claim to the commercial court in the course of the insolvency proceedings.
(b)	2.  The applicants
19.  The applicants maintained that the debtor company had been, in fact, a State‑run company controlled by the local authority and that the State was responsible for the municipal company’s debts.
Section 4.02	B.  Admissibility
(a)	1.  Compliance with the six-month rule
20.  The Court has held that complaints about the non-enforcement by municipal unitary companies of final judgments should normally be introduced within six months of the termination of the insolvency proceedings in respect of the relevant company (see Bichenok v. Russia (dec.), no. 13731/08, 31 March 2015).
21.  The second applicant lodged her application on 16 January 2008 whereas the insolvency proceedings in respect of the municipal company were discontinued on 7 May 2007 (see paragraph 8 above). The second applicant’s complaint is therefore inadmissible as introduced out of time.
(b)	2.  Compatibility ratione personae
22.  The Court has held that the existing legal framework in Russia does not provide unitary companies with a degree of institutional and operational independence that would absolve the State from responsibility under the Convention for the debts of such companies (see Liseytseva and Maslov, cited above, §§ 193-204). In order to determine the issue of State responsibility for the debts of unitary companies the Court must examine whether and how the extensive powers of control provided for in domestic law were actually exercised by the authorities in the present case.
23.  The Court notes that the municipal company was set up to provide heating supply and maintenance services in respect of municipal housing (see paragraph 9 above). In Liseytseva and Maslov (cited above, § 208) the Court held that such companies’ institutional links with public administration were particularly strengthened by the special nature of their activities (see also Yershova v. Russia, no. 1387/04, § 58, 8 April 2010).
24.  Furthermore, the actual degree of the State control over the municipal company was demonstrated by the fact that local authorities disposed of its property as they saw fit. According to the information submitted by the applicants and not disputed by the Government, on 27 April 2002 the local authority withdrew most of the assets from the municipal company’s economic control (see paragraph 10 above) to be later allocated to a new company. The Court examined a similar situation in Liseytseva and Maslov (cited above, §§ 211 and 217), and found that that company’s assets and activities had been, as a matter of fact, controlled by the State to a decisive extent and that accordingly the State was liable for that company’s debts.
25.  In the light of the above the Court finds that the municipal company did not enjoy sufficient institutional and operational independence from the municipal authorities and dismisses the Government’s ratione personae objection. Accordingly, the municipality, and hence the State, is to be held responsible under the Convention for the debts owed by the respondent company to the first applicant in accordance with the final judgment in his favour.
(c)	3.  Exhaustion of domestic remedies
26.  In Liseytseva and Maslov (cited above, § 164) the Court dismissed a similar objection raised by the Government. There is no reason to reach a different conclusion in the present case.
(d)	4.  Conclusion
27.  The Court further notes that the first applicant’s complaint under Articles 6 and 13 of the Convention and Article 1 of Protocol No. 1 to the Convention is not manifestly ill‑founded within the meaning of Article 35 § 3 (a) of the Convention and it is not inadmissible on any other grounds. It must therefore be declared admissible. As to the second applicant, her complaint is inadmissible as lodged out of time (see paragraph 21 above).
Section 4.03	C.  Merits
28.  The Court notes that the judgment in the first applicant’s favour has not been enforced to date.
29.  The Court has established above that the State is responsible under the Convention for the debts owed by the municipal company (see paragraph 25 above). By failing to comply with the judgment the national authorities prevented the applicant from receiving the money he could reasonably have expected to receive. The Court has found a violation of Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention in respect of issues similar to those in the present case (see Liseytseva and Maslov, cited above, §§ 208-24).
30.  As regards the effective remedies, the Court has already held in respect of the similar situations in Liseytseva and Maslov (cited above, §§ 165‑72) that there were no effective remedies for the applicants in their attempt to obtain either the execution of the awards made against the municipal unitary companies or compensation for the alleged violations.
31.  The Court finds no reason to hold otherwise in the present case. Accordingly, it finds a violation of Article 6 § 1 and Article 13 of the Convention and of Article 1 of Protocol No. 1 to the Convention on account of the non-enforcement of the final and binding judgments in the first applicant’s favour and the lack of effective remedies.
Article V.	III.  OTHER COMPLAINTS
32.  The Court observes that the second applicant also complained, under Article 2 of the Convention, of the damage to her health (see paragraph 7 above) and of the lack of investigation into the events. She further complained, under Articles 6 and 14 of the Convention, that that the length of the proceedings had been excessive, that the courts had erred in the assessment of facts and application of law, and that the courts had incorrectly calculated the amount of compensation for the income lost and thus had made her subject to discrimination in relation to her right to remuneration for work.
33.  Having regard to all the evidence in its possession, and to the extent that it has the power to examine the allegations, the Court does not find any appearance of a violation of the rights and freedoms guaranteed by those provisions. It follows that this part of the application must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.
Article VI.	IV.  APPLICATION OF ARTICLE 41 OF THE CONVENTION
34.  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.”
Section 6.01	A.  Damage
35.  The first applicant claimed 11,482 euros (EUR) in respect of pecuniary and non-pecuniary damage.
36.  The Government submitted that the claims were unreasonable and excessive.
37.  In view of its findings above the Court finds it appropriate to award Mr Kim EUR 1,270 the full sum that had been initially awarded to him by domestic courts in respect of pecuniary damage.
38.  As to non-pecuniary damage, the Court considers it reasonable and equitable to award EUR 2,000, plus any tax that may be chargeable, to the first applicant (see Voronkov v. Russia, no. 39678/03, §§ 68‑69, 30 July 2015).
Section 6.02	B.  Costs and expenses
39.  The first applicant did not claim costs and expenses and, accordingly, there is no cause to make an award under this head.
Section 6.03	C.  Default interest
40.  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 application no. 20813/08 inadmissible and application no. 22094/05 admissible;

3.  Holds that there has been a violation of Article 6 § 1 and Article 13 of the Convention and of Article 1 of Protocol No. 1 to the Convention in respect of Mr Kim following the non-enforcement of domestic decisions and the lack of any effective remedy in domestic law;

4.  Holds
(a)  that the respondent State is to pay Mr Kim, 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 1,270 (one thousand two hundred and seventy euros) in respect of pecuniary damage;
(ii)  EUR 2,000 (two thousand euros) in respect of non-pecuniary damage;
(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 the remainder of the first applicant’s claim for just satisfaction.
Done in English, and notified in writing on 17 January 2017, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
	Fatoş Aracı	Helena Jäderblom
	Deputy Registrar	President