Last Updated on March 1, 2022 by LawEuro
Information Note on the Court’s case-law 260
March 2022
Sebeleva and Others v. Russia – 42416/18
Judgment 1.3.2022 [Section III]
Article 1 of Protocol No. 1
Article 1 para. 2 of Protocol No. 1
Control of the use of property
Attachment of shares held by the applicants, with a total freeze on all related rights for four years and eight months, without sufficient justification: violation
Facts – The first applicant is the daughter of S. Until October 2014 he was a shareholder in the company OTS. The other three applicants are family members of S.’s wife. The applicants purchased shares in OTS. The first three applicants became majority shareholders in the company.
In October 2016 S. was placed under investigation for fraud and aggravated embezzlement of OTS funds.
In February and March 2017 two extraordinary general meetings of OTS shareholders were held. At the close of these meetings, the shareholders (with the exception of the State) validated almost all of the sale contracts which had resulted in S. being placed under investigation. Finding these resolutions to be illegal and improper, the commercial courts ordered that they be set aside.
In May 2017 the district court authorised the attachment of the shares. It considered that the applicants’ acquisition of the shares had been intended to conceal the fact that S. was the true owner and that he could therefore continue to embezzle OTS’s funds and damage the company. In consequence, it prohibited the exercise of the rights attached to the shares for the duration of their attachment.
In July 2017 the regional court upheld the attachment order on appeal.
By a decision of 6 August 2018, the investigator classified the impugned shares as physical evidence: they were one method used by S.to commit offences and they contained information capable of leading to the establishment of the facts of the case.
The district court then ordered the renewed imposition of the attachment measure on the same grounds, or a further attachment of the shares, throughout the criminal proceedings against S., and until 6 April 2022. Appeals by the applicants, who systematically denied having acted under S.’s orders and being linked to him, were dismissed.
Law – Article 1 of Protocol No. 1:
(a) Admissibility
i. The existence of a possession
The applicants had purchased the impugned shares from S., from other members of his family and from third parties, during and after the period in which the offences imputed to S. were committed. The prosecuting authorities and the criminal courts had considered that S. was the “real owner” of these shares. However, the applicants’ ownership had never been contested in a judgment which had acquired legal force. Having regard to the legally valid nature of the purchases made by the applicants and the economic value of the contested shares, the latter thus constituted possessions within the meaning of Article 1 of Protocol No. 1.
ii. The objection concerning the absence of a “significant disadvantage”
On the date of the interference, the fourth applicant held two shares: one so-called “ordinary” share and one so-called “preference” share, representing 0.005% and 0.015% respectively of OTS’s share capital and each having a nominal value of one rouble. In those circumstances, any damage sustained by this applicant could not be considered sufficiently “significant” within the meaning of Article 35 § 3 (b) of the Convention.
Given the Court’s an abundant case-law on attachment in criminal proceedings, respect for human rights did not require this applicant’s complaint to be examined on the merits.
With regard to the first three applicants, who each held several thousand shares, the Government’s objection amounted to denying them shareholder status.
(b) Merits
The impugned attachment measure constituted a control of the use of property.
i. Lawfulness and legitimate aim of the interference
The interference had a legal basis in that the authorities had plausible reasons to believe that the shares has been used by S. to commit the offences with which he had been charged. It pursued a legitimate aim in the general interest, namely to prevent the commission of offences.
However, for two months and thirteen days, the attachment had not been authorised by any court order. In consequence, the attachment had been unlawful and therefore incompatible with the requirements of Article 1 of Protocol No. 1 during this period.
ii. The proportionality of the interference
Although the total duration of the attachment measure, that is, four years and eight months, did not in itself render the interference disproportionate, the Court attached great importance to the reasoning of the decisions imposing this measure, in view, firstly, of this long duration and, secondly, of the nature and degree of the restrictions resulting from them.
In this connection, the attachment of the applicants’ shares had deprived them of all the related rights, including the right to obtain information about the company, and the competent national courts had not envisaged restrictions that would have been less radical for the applicants’ right to peaceful enjoyment of their possessions.
The domestic courts had renewed the attachment order in practically identical terms, relying systematically on the same grounds, including the necessity of, on the one hand, protecting the victim’s rights and preventing S. from continuing to manage the company’s assets, and, on the other, guaranteeing the payment of a possible criminal fine.
The domestic courts had failed to assess the proportionality of the continued extension of the attachment order; they had also not envisaged alternatives to it, despite the guidance from the Constitutional Court.
Moreover, the courts had not explained how the shares could constitute an “instrument of crime”; nor had they explained how these shares, in virtual form, could contain information likely to contribute to establishing the facts of the case.
Lastly, at no point had the courts assessed the applicants’ arguments to challenge the allegations that they had acted under orders from S. On the contrary, the courts had held that they did not have jurisdiction in this regard, while simultaneously criticising the applicants for not refuting the prosecuting authorities’ submissions. In this connection, while it was undisputed that the applicants were related by blood or marriage to S., none of them had been charged with committing any offence related to the acts with which S. had been accused. The fact that in February and March 2017 the shareholders, in an extraordinary general meeting, had adopted resolutions that were subsequently found to be illegal and improper had not been referred to at any point in order to justify the attachment of the shares or the renewal of this measure.
In all, the domestic courts had not provided sufficient grounds to justify the necessity of the contested attachment and its extension. The interference had not been proportionate, making it unnecessary to examine the other arguments raised by the parties.
Conclusion: violation (unanimously).
Article 41: EUR 2,000 to each of the first three applicants in respect of non-pecuniary damage. Claims in respect of pecuniary damage dismissed.
(See also Uzan and Others v. Turkey, 19620/05 et al., 5 March 2019, Legal summary; OOO Avrora Maloetazhnoe Stroitelstvo v. Russia, 5738/18, 7 April 2020)
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