Last Updated on November 1, 2019 by LawEuro
FOURTH SECTION
DECISION
Application no. 7629/10
S.C. VINALCOOL ARGEŞ S.A.
against Romania
The European Court of Human Rights (Fourth Section), sitting on 9 October 2018 as a Committee composed of:
Paulo Pinto de Albuquerque, President,
Egidijus Kūris,
Iulia AntoanellaMotoc, judges,
and Andrea Tamietti, Deputy Section Registrar,
Having regard to the above application lodged on 9 December 2009,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
1. The applicant, S.C. VinalcoolArgeş S.A., is a Romanian limited company with its headquarters in Piteşti. The applicant company was represented before the Court by Ms R. Folescu, a lawyer practising in Piteşti.
2. The Romanian Government (“the Government”) were represented by their Agent, Ms C. Brumar, from the Ministry of Foreign Affairs.
A. The circumstances of the case
3. The facts of the case, as submitted by the parties, may be summarised as follows.
1. Background of the case
4. The applicant company was created under Law no. 15/1990 on the Reorganisation of State-owned Companies into Commercial Companies. Under Article 20 of that Law, it took over the assets of a former economic unit owned by the communist State. The State owned all the shares in the new company and administered them through the State Property Fund (FondulProprietăţii de Stat – “the F.P.S.”). In 1994 the Ministry of Agriculture and Food issued a certificate (“the 1994 certificate”) recording which possessions constituted the company’s assets.
5. On 8 January 1998 the F.P.S. transferred its shares in the applicant company to the Oltenia Financial Investment Company (Societatea de InvestiţiiFinanciareOltenia S.A. – “S.I.F. Oltenia”). Founded in 1993 as a private property fund, S.I.F. Oltenia was reorganised in accordance with Law no. 133/1996 on the Transformation of Private Ownership Funds in Financial Investment Companies and is currently an entirely privately‑owned company. In exchange, the F.P.S. received shares in other State-owned companies. The applicant company thus became a privately‑owned company.
6. On 8 June 2005 S.I.F. Oltenia sold 66.9 % of the shares in the applicant company to private entities (the current shareholders).
2. Proceedings against the applicant company for the restitution of property
7. Meanwhile, on 29 October 2002, three individuals brought an action against the applicant companyfor the restitution of property, claiming that the land recorded in the 1994 certificate had been unlawfully confiscated from their grandparents by the communist State. They relied on the provisions of Lawno. 10/2001 on the Restitution of Property.
8. In a judgement of 16 October 2003, the Argeş County Court ordered the applicant company to surrender to the plaintiffs the land and the buildings erected on it. The court found that the plaintiffs’ grandparents had been the rightful owners of the assets, which had been unlawfully nationalised in 1950. It considered that the 1994 certificate issued to the applicant company (see paragraph 4 above) did not constitute a valid property title deed, as it only acknowledged the factual situation existing as at the date of its delivery.
9. The applicant company appealed. On 1 July 2004 the Argeş Court of Appeal found that the buildings had been demolished and that their restitution was thus no longer possible. It therefore replaced the obligation to return the buildings with an order to pay compensation to the plaintiffs.
10. The High Court of Cassation and Justice upheld those findings in a final decision adopted on 7 February 2006.
11. On 8 March 2007 the applicant company surrendered possession of the land.
3. Action in compensation against the State
12. On 2 May 2007 the applicant company brought an action against the State and the Authority for Recovery of State Assets (AutoritateapentruValorificareaActivelorStatului – “the A.V.A.S.” – a new organisation encompassing the former F.P.S. – see paragraph 4 above) seeking compensation for the loss it had incurred because of the restitution of its assets to their former owner. It estimated the damage at 643,280.16 Romanian lei (RON – approximately 190,000 euros at the relevant time). It relied on Government Emergency Ordinance no. 88/1997 on the Privatisation of Commercial Companies (“Ordinance No. 88/1997” – see paragraph 15 below).
13. On 15 May 2008 the Argeş County Court granted the action. It observed that the applicant company had been privatised in 1998 by the State and held that the A.V.A.S. and the State were responsible for the loss incurred by the applicant, under the provisions of Article 324 of Ordinance no. 88/1997 (see paragraph 15 below). It therefore ordered the defendants to pay RON 643,280.16 to the applicant company. Both parties appealed.
14. In a final decision of 23 June 2009, the High Court of Cassation and Justice quashed that ruling. It held that the applicant company had been privatised by means of a non-pecuniary assignment under normative provisions which had been expressly abolished by Ordinance no. 88/1997. Consequently, the privatisation had not been covered by the provisions of Ordinance no. 88/1997, which had only regulated privatisation by means of sale contracts. The court concluded that the State’s liability could not be engaged.
B. Relevant domestic law
15. Ordinance no. 88/1997 read as follows, in so far as relevant, as at the date of the facts (specifically 8 January 1998 – see paragraph 5 above):
Article 1
“This ordinance sets the legal framework for selling shares in companies owned by the State or by the local public administration, as well as for selling assets belonging to companies in which the State or the local public administration own shares …”
Article 5
“The State Property Fund is a public-interest institution, with legal personality, subordinated to the Government, which acts [to diminish] the participation of the State and of the local public authorities in the economy by selling … shares [in itself].”
Article 324
“1. The public institutions involved in privatisation grant compensation to companies which have been privatised or are in the process of privatisation for the damage caused to them by the restitution to the former owners of assets that were nationalised by the State. …
5. If the companies are ordered, by final court decisions, to pay compensation for confiscated possessions when restitution in kind is not possible, the public institutions involved in the privatisation [in question] will pay such compensation directly to the rightful owners.
6. The State guarantees the fulfillment by the public institutions of the obligations set out in this Article.”
16. Under the relevant provisions of Law no. 137/2002 concerning measures for accelerating the process of privatisation (Article 29 § 3), the public institutions involved in privatisation will pay compensation to buyers with whom they have concluded sale contracts and not to the companies themselves. Under Article 30 § 3 of the same Law, the new regulations did not apply to sale contracts concluded before the entry into force of the regulation; such contracts remained under the authority of Ordinance no. 88/1997. This interpretation was reaffirmed by the High Court of Cassation and Justice in its decision no. 18 of 17 October 2011 adopted in the examination of an appeal in the interest of law.
17. Contractual liability for dispossession, (garanţiapentruevicţiune) as regulated by the Civil Code as at the date of the facts, is described in Costescu v. Romania (dec.), no. 13636/02, § 18, 3 March 2009. This liability is also applicable to commercial transactions.
COMPLAINT
18. The applicant company complained that by dismissing its action against the A.V.A.S. and the State, the courts had wrongly interpreted the provisions of Ordinance no. 88/1997 and had disregarded its right to receive compensation for the loss of possessions, thus breaching its right to fair proceedings and causing it damage. It relied on the provisions of Articles 1, 6 and 13 of the Convention and of Article 1 of Protocol No. 1 to the Convention.
THE LAW
19. The applicant company complained that by dismissing its action against the A.V.A.S. and the State, the courts had disregarded its right to receive compensation for the loss of its possessions. It relied on the provisions of Articles 1, 6 and 13 of the Convention and of Article 1 of Protocol No. 1 to the Convention.
20. The Court is the master of the characterisation to be given in law to the facts of the case and does not consider itself bound by the characterisation given by an applicant or a government (see, among the most recent authorities, Radomilja and Others v. Croatia [GC], nos. 37685/10 and 22768/12, § 114, 20 March 2018 and Garib v. the Netherlands [GC], no. 43494/09, § 98, 6 November 2017). Therefore, it considers that the case falls to be examined under Article 1 of Protocol No. 1 alone, which reads as follows:
“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.”
A. The parties’ submissions
21. The Government argued that Ordinance No. 88/1997 regulated a special form of responsibility for dispossession that was only applicable to privatisation via the sale of shares or property, which thus rendered it inapplicable to the present situation. On this point, they reiterated that the applicant company had been privatised by means of a non-pecuniary assignment of its shares. Furthermore, they considered that the interference with the applicant company’s property right had been justified for the purpose of Article 1 of Protocol No. 1; notably, it had been provided for by Law no. 10/2001, done in the public interest in affording reparation for the abusive confiscation of property under the communist regime and been proportionate. The Government pointed out that the States enjoyed a wide margin of appreciation in this field and that a total lack of compensation can be considered justifiable under Article 1 in exceptional circumstances (they referred to The Holy Monasteries v. Greece, 9 December 1994, § 71, Series A no.301‑A; Former King of Greece and Others v. Greece [GC], no. 25701/94, § 89, ECHR 2000‑XII; and Zvolský and Zvolská v. the Czech Republic, no. 46129/99, § 70, ECHR 2002‑IX).
22. On the facts of the case, the Government pointed out that the initial transfer of the assets in question to the applicant company during the communist regime had taken place without any payment. Likewise, the transfer of the applicant company’s shares to the private sector had been undertaken without any payment to the State. In this context, it is reasonable to not impose on the State an obligation to provide compensation in the event of dispossession, similar to that provided by Ordinance no. 88/1997, as the State did not obtain any gain from the transfer of the assets in question.
23. The Government accepted that the subsequent diminution of the applicant company’s shares, due to the loss of the assets in question, may have affected the buyers. However, they pointed out that the latter had purchased the shares in the applicant company in 2005, when the proceedings for the restitution of property were ongoing and a court had already found against the applicant company (see paragraph 8 above). The proceedings being public, the buyers must have been aware of the risks taken but had decided to proceed with the purchase notwithstanding.
24. The applicant company reaffirmed that the privatisation had taken place in 1998 and had not been done free of charge, as the State had received shares in other companies in exchange for its shares in the applicant company (see paragraph 5 above).
B. The Court’s assessment
25. The Court makes reference to its well-established case-law concerning the protection afforded to property rights by Article 1 of Protocol No. 1 to the Convention and in particular concerning the requirements of proportionality in cases involving the taking of possessions without compensation (see notably Vistiņš and Perepjolkins v. Latvia (merits) [GC], no. 71243/01, §§ 93-94, 25 October 2012, and Former King of Greece and Others, cited above, §§ 89 and 90).
26. Turning to the facts of the case under examination, the Court notes that certainly, there are doubts as to whether the privatisation was undertaken in accordance with the law, as observed by the High Court of Cassation and Justice in its final judgment (see paragraph 14 above). However, the Court is not called upon to examine the conformity with the requirements of Article 1 of Protocol No. 1 of that particular procedure. Nor is the Court called upon to examine the outcome of the action lodged against the applicant company for the restitution of property by the former owners of the assets (see paragraph 8 above). The Court has only to assess whether the fact that the applicant company received no compensation from the State following the loss of its assets (see paragraph 14 in fine, above) complied with the requirements of the Convention.
27. The Court notes that the domestic courts concluded on the facts of the case that Ordinance no. 88/1997 did not apply to the situation presented before them (see paragraph 14 above). The Court has no reasons to depart from those findings. In any event, it notes that the applicant company did have at its disposal the possibility to bring an action for dispossession (acţiuneaînevicţiune) on the basis of contractual law under the general rules laid down by the Civil Code (see paragraph 17 above), but it appears that neither the applicant company nor its shareholders availed themselves of that option.
28. Moreover, the Court considers that the applicant company did not convincingly demonstrate that it had suffered loss. In fact, it received free of charge the contested assets from the State (see paragraph 4 above), which was never in fact their rightful owner (see paragraph 8 in fine above). In this context, the applicant company did no more than return to their rightful owners assets which had been entrusted to it by the State. The Court observes that the only individuals who can claim financial loss are the shareholders, who paid money to the State to acquire shares in a company whose assets diminished soon after the purchase (see paragraph 6 above). However, the shareholders neither claimed compensation for dispossession from the State, nor brought their grievance before the Court. Moreover, as pointed out by the Government, at the date of their purchase of their shares they should have been aware that the companies’ assets were being successfully claimed by a third party (see, notably, paragraphs 6 and 8 above). It is thus safe to assume that they purchased the shares in the applicant company notwithstanding the risk of seeing their value diminished at the end of those proceedings.
29. Under these circumstances, the Court considers that notwithstanding the absence of compensation, the applicant company did not have to bear a disproportionate and/or excessive burden and that the facts of the case do not disclose any appearance of violation of Article 1 of Protocol No. 1 to the Convention.
Accordingly, the application is manifestly ill-founded and must be rejected, in accordance with Article35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 8 November 2018.
Andrea Tamietti Paulo Pinto de Albuquerque
Deputy Registrar President
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