The application concerns the applicant company’s complaint that because of a wrongful interpretation of the domestic law regulating insolvency proceedings, namely Law no. 85/2014, and in particular Article 42 § 3 of that Law, the domestic courts denied it the right to have its claims against a private party become enforceable.
CASE OF AGROKUALITA EOOD v. ROMANIA
(Application no. 18669/19)
5 July 2022
This judgment is final but it may be subject to editorial revision.
In the case of Agrokualita Eood v. Romania,
The European Court of Human Rights (Fourth Section), sitting as a Committee composed of:
Yonko Grozev, President,
Iulia Antoanella Motoc,
Pere Pastor Vilanova, Judges,
and Crina Kaufman, Acting Deputy Section Registrar,
Having regard to:
the application (no. 18669/19) against Romania lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 22 March 2019 by a Bulgarian limited company, Agrokualita Eood, registered in Sofia (“the applicant company”), which was represented before the Court by Mr I.L. Purdea, a lawyer practising in Timișoara;
the decision to give notice of the application to the Romanian Government (“the Government”), represented by their Agent, Ms O. Ezer, of the Ministry of Foreign Affairs;
the parties’ observations;
Having deliberated in private on 14 June 2022,
Delivers the following judgment, which was adopted on that date:
SUBJECT MATTER OF THE CASE
1. The application concerns the applicant company’s complaint that because of a wrongful interpretation of the domestic law regulating insolvency proceedings, namely Law no. 85/2014, and in particular Article 42 § 3 of that Law, the domestic courts denied it the right to have its claims against a private party become enforceable.
2. The applicant company is a Bulgarian limited company whose sole shareholder is Mr R.S., who is also its managing director.
3. On 15 December 2016 A., a Romanian company, filed for bankruptcy and a liquidator was appointed by the court, with responsibility for, inter alia, notifying all potential creditors about the bankruptcy proceedings. In accordance with Law no. 85/2014, the liquidator set the date of 30 January 2017 as the time-limit within which all creditors were to register their claims against A.
4. R.S., in his private capacity as a creditor of A., submitted, within the time-limit set, a request to be registered as a creditor, his claims being separate from that of the applicant company.
5. The applicant company was never notified about those proceedings, even though it had an uncontested claim of 848,104.77 Romanian lei against A. It therefore submitted a request on 24 February 2017 to have its claim registered, relying on Article 42 § 3 of Law no. 85/2014, pursuant to which claims by creditors who had not been notified, in accordance with the rule set out in the Code of Civil Procedure, about the start of the insolvency proceedings so that they could be included in the statement of affairs concerning the insolvent company, were to be treated as having been submitted within the time-limit as of right, and were therefore allowed to be included in the statement of affairs.
6. The liquidator registered the applicant company’s claim on that basis and issued the statement of affairs of A. The statement was challenged by F.B., another creditor of A., who argued that the applicant company’s claim had been submitted late and that the company should be removed from the final list of creditors.
7. On 3 May 2018 the Timiș First-Instance Court decided in favour of F.B., and that decision was upheld on appeal by the Timiș Court of Appeal on 25 September 2018. The domestic courts decided to remove the applicant company’s claim from the statement of affairs in so far as they considered that it had been added outside the time-limit, because even though it had not been properly notified about the bankruptcy proceedings in accordance with Law no. 85/2014, it had to have been aware of those proceedings as of the time when its managing director, R.S., had joined his claim to the statement of affairs as a private creditor. The very purpose of the notification procedure was to make all potential creditors aware of the initiation of bankruptcy proceedings, and that purpose had proved to have been accomplished as soon as R.S. had become aware of the bankruptcy proceedings against A.
8. In support of its claim before the Court that the relevant domestic case‑law was contradictory, the applicant company submitted three final decisions given in 2018 in which, in similar circumstances to those in the present case, three different domestic appellate courts had held that if the creditors had not been properly notified of the start of the insolvency proceedings, any requests they may have lodged outside the time-limit set by the liquidator to have their claims included in the statement of affairs were to be accepted, it being irrelevant whether they could have become aware of those proceedings in other ways than by proper notification. The applicant company also argued that in so far as the notification procedure as set out in Law no. 85/2014 was individual, it should have been notified as such, its legal personality being different from that of its managing director. The fact that its managing director had been made aware in his personal capacity of the bankruptcy proceedings was of no relevance as far as the validity or the necessity of the notification procedure were concerned.
9. The Government argued that there was no divergent case-law on the matter, relying on domestic judgments and opinions given by various courts across the country, which had essentially held that as a matter of principle, isolated cases did not constitute conflicting case-law; the courts had considered, however, that under Article 42 § 3 of Law no. 85/2014, the failure to notify creditors in accordance with the Code of Civil Procedure implied that their claims were considered as of right to have been lodged within the time‑limit. Some courts had also considered it irrelevant whether the creditor was otherwise aware of the initiation of the bankruptcy proceedings against the debtor so long as he or she had not been properly notified thereof; in some opinions, the latter circumstance was acceptable only where the creditor lodged his or her claim against the debtor within the shortest time possible once he or she became aware of the initiation of the bankruptcy proceedings. The Timiș Court of Appeal had confirmed that its line of case-law was similar to the decision given in the applicant company’s case.
10. In any event, the Government stressed that the domestic court had found in the present case that even though the applicant company had not been properly notified of the bankruptcy proceedings as required by Law no. 85/2014, it had to have been aware of those proceedings as of the time when its managing director, R.S., had been included in the statement of affairs as a private creditor. The purpose of the notification procedure had therefore been accomplished in the sense that the applicant company had been aware of the bankruptcy proceedings, and yet had failed to act within the set time-limit. Therefore, it had been sanctioned for its inaction by having its claim denied.
THE COURT’S ASSESSMENT
11. The applicant company complained under Article 6 § 1 of the Convention that it had been denied a fair trial on account of the erroneous decisions of the domestic courts, which, in spite of the existing domestic law and case-law to the contrary, had wrongly rejected as out of time its request to have its claim joined to the statement of affairs in respect of A.
I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION
12. The Court considers it appropriate to examine the applicant company’s complaint from the perspective of the right of access to a court, as guaranteed by Article 6 § 1 of the Convention (see Cañete de Goñi v. Spain, no. 55782/00, § 33, ECHR 2002‑VIII). It refers in this connection to the recapitulation of its case‑law concerning access to court in the Grand Chamber case of Zubac v. Croatia ([GC] no. 40160/12, §§ 76-79, 5 April 2018).
13. This complaint is not manifestly ill‑founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. It must therefore be declared admissible.
14. Although time-limits are in principle legitimate procedural limitations on access to a court, their interpretation in disregard of relevant practical circumstances may result in violations of the Convention (see, mutatis mutandis, Neshev v. Bulgaria, no. 40897/98, § 38, 28 October 2004). Therefore, while the right to bring an action is of course subject to statutory requirements, the courts are bound to apply the rules of procedure avoiding both excessive formalism that would impair the fairness of the proceedings and excessive flexibility such as would render nugatory the procedural requirements laid down in statutes (see, mutatis mutandis, Eşim v. Turkey, no. 59601/09, § 21, 17 September 2013).
15. The Court observes that what is at the heart of the present case is in fact not a matter of conflicting domestic case-law as such, but rather the domestic courts’ decision to essentially put aside the procedural rule laid out in the law which expressly required that all creditors be notified, failing which their requests to have their claims joined to the statement of affairs would be considered to have been duly submitted within the time-limit; that reasoning was based on the courts’ presumption that once the applicant company’s managing director had become aware of the bankruptcy proceedings initiated in respect of A., the applicant company itself must also have been aware of those proceedings and therefore could also have exercised its rights to lodge its claims, in spite of the lack of any notification procedure as required by Law no. 85/2014.
16. While it is primarily for the national authorities, notably the courts, to resolve problems of interpretation of procedural rules, such as time-limits for filing documents or lodging appeals, the Court must nevertheless verify the compatibility with the Convention of the effects of such interpretation, and in particular whether it was carried out in a foreseeable and reasonable manner, without constituting a bar to the applicant company’s effective access to a court (see, mutatis mutandis, Kurşun v. Turkey, no. 22677/10, § 95, 30 October 2018).
17. Having regard to the information in the case file, including the domestic courts’ opinions on the matter at stake (see paragraph 9 above), the Court considers that when viewed in the context of the present case, the decision by the domestic courts to essentially put aside, on the basis of a presumption, the clear procedural rule requiring that all creditors be notified (see paragraph 15 above), seemingly lacked clear and consistent precedential support at the material time.
18. Moreover, the rules on notification and all exceptions thereto can be regarded as being aimed at serving legal certainty and the proper administration of justice. However, the Court fails to see how the expected application of those rules in the present case, which would have called for allowing the applicant company to join its claims to the statement of affairs, would have been incompatible with the above-mentioned aims, especially considering that the claims had been submitted within a very short time, namely less than one month, after the expiry of the time-limit imposed by the liquidator.
19. In fact, the domestic courts’ interpretation of those rules of notification in the context of bankruptcy proceedings was not sufficiently foreseeable and proportionate so as to be considered as “an acceptable application of procedural formalities” (see Zubac, cited above, § 98); furthermore, such construction of the said rules formed a barrier which prevented the applicant company from having its case examined by the competent court, thus unjustifiably restricting its right of access to a court protected by Article 6 of the Convention.
20. There has accordingly been a violation of that Article.
II. OTHER COMPLAINTS
21. The applicant company also complained under Article 1 of Protocol No. 1 to the Convention that its claim against A. could no longer be satisfied on account of the courts’ having denied its right to join its claim to the statement of affairs of A. Having regard to its conclusions set out in paragraph 20 above, the Court concludes that this complaint must be declared admissible, but that there is no need to rule on its merits (see, Zanghì v. Italy, 19 February 1991, § 23, Series A no. 194-C, and Ruianu v. Romania, no. 34647/97, § 75, 17 June 2013).
APPLICATION OF ARTICLE 41 OF THE CONVENTION
22. The applicant company claimed 271,375.84 euros (EUR) in respect of pecuniary damage (covering the amount of the claim against A. and the loss of goods), EUR 25,000 in respect of non-pecuniary damage and 100 Romanian lei (approximately 20 EUR) in respect of the costs and expenses incurred before the domestic courts.
23. The Government considered those claims unjustified and excessive.
24. The Court does not discern any causal link between the violation found and the pecuniary damage alleged; it therefore rejects that claim. However, it awards EUR 1,500 in respect of non-pecuniary damage, plus any tax that may be chargeable.
25. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the sum claimed covering costs and expenses in the domestic proceedings, plus any tax that may be chargeable.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;
2. Holds that there has been a violation of Article 6 of the Convention;
3. Holds that there is no need to rule on the merits of the complaint under Article 1 of Protocol No. 1 to the Convention;
(a) that the respondent State is to pay the applicant company, 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 1,500 (one thousand five hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(ii) EUR 20 (twenty euros), plus any tax that may be chargeable to the applicant company, 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;
5. Dismisses the remainder of the applicant company’s claim for just satisfaction.
Done in English, and notified in writing on 5 July 2022, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Crina Kaufman Yonko Grozev
Acting Deputy Registrar President
 approximately EUR 190,000, 2016 exchange rate of RON 4.5 per euro