Last Updated on May 19, 2019 by LawEuro
Communicated on 2 October 2018
FOURTH SECTION
Application no. 56714/11
ATIMA LIMITED
against Ukraine
lodged on 1 September 2011
STATEMENT OF FACTS
1. The applicant company, Atima Limited, is a limited liability company registered in Cyprus in 2010. It is represented before the Court by Mr V. Bobryk, a lawyer practising in Kyiv.
2. The facts of the case, as submitted by the applicant company, may be summarised as follows.
A. Background of the case
3. On 8 February 2007 the Kyiv City Council (“the Council”) adopted a privatisation programme for 2007-2010 in respect of property belonging to the Kyiv municipality (“the municipality”). On 12 July 2007 it amended that programme to include, among others, company K. on a list of companies to be sold. The municipality, as represented by the Council, owned 80% of the shares in that company.
4. On 29 July 2009, following a public sale organised by company U. on 21 July 2009, company N. bought from the Council the above 80% of the shares in company K.
5. On 2 July 2010 the applicant company bought some of those shares from company N. Pursuant to the sale and purchase contract, the applicant company was to become the owner of the purchased shares at the moment when they were credited to its securities account opened with a company acting as a depository, company F.; a statement from the applicant company’s securities account would be the document confirming the transfer of the property rights to the shares to the applicant company. On the same day a notary certified that contract and entered information about it in the relevant registry. On the same day company F. issued to the applicant company a statement confirming that the shares it had purchased from company N. had been credited to its account. On 10 August 2010 the applicant company paid 12,100,000 Ukrainian hryvnias (UAH – around 1,157,164 euros (EUR)) to company N. for the value of the purchased shares.
B. Proceedings instituted by the Deputy Prosecutor General against company N.
6. In August 2010 the Deputy Prosecutor General, acting in the interests of the State as represented by the Council, lodged a claim with the Kyiv City Commercial Court (“the Commercial Court”) against company N., seeking to have the contract of 29 July 2009 (see paragraph 4 above) invalidated, the municipality recognised as the owner of the shares in company K. that had been bought by company N., and the shares returned to the municipality.
7. The applicant company asked the court to allow it to join the proceedings as third party, given that it was the owner of some of the disputed shares. The court rejected the application, holding that the applicant company had not provided evidence that it was the owner of the shares.
8. By a judgment of 20 October 2010 the court allowed the claim in part, having recognised the municipality as the owner of the shares in company K. which had been sold to company N. In particular, it referred to a decision of the Kyiv Commercial Court of Appeal (“the Court of Appeal”) of 14 October 2010 (a copy of which was not provided by the applicant company), whereby that court had declared the decision of 12 July 2007 (see paragraph 3 above) unlawful as far as it concerned the privatisation of company K. As to the claim to invalidate the contract of 29 July 2009, the court stated that, given that the decision of 12 July 2007 had been unlawful, the above contract did not entail any legal consequences and could therefore not be invalidated by a court.
9. The applicant company appealed against the above judgment, stating that it was the owner of some of company K.’s shares, as confirmed by a statement issued by company F. Therefore, the above judgment had breached its property rights. Furthermore, at the moment when the contract of 29 July 2009 had been concluded, there had been no court decision invalidating the decision of 12 July 2007.
10. The Court of Appeal allowed the applicant company to join the proceedings as a third party. On 18 January 2011 it upheld the above judgment in part in relation to allowing the Deputy Prosecutor General’s claim. In addition, it invalidated the contract of 29 July 2009. The court found that company K. had belonged to the category of companies which could be privatised subject to certain conditions set out in the domestic law. It held that, in breach of those conditions, no assessment of the value of company K.’s shares had been made prior to the company being privatised, and no conclusion about the value of those shares had been prepared and approved by the local authorities. Furthermore, the public sale of 21 July 2009 (see paragraph 4 above) had been organised by company U., which had not been a licensed stock exchange company as required by the law. Lastly, the court held that the applicant company had not provided adequate evidence to rebut the Deputy Prosecutor General’s claim.
11. The applicant company appealed in cassation to the Higher Commercial Court of Ukraine (“the HCCU”). It stated that it was the owner of some of the disputed shares and that the public sale of 21 July 2009 had been held in accordance with the law. With reference to Article 1 of Protocol No. 1 and the domestic law, it lastly submitted that there could be no deprivation of property unless, in particular, compensation was provided.
12. On 2 March 2011 the HCCU rejected the applicant company’s appeal. In upholding the decision of 18 January 2011 (see paragraph 10 above), it agreed that the public sale had been organised by a company which had not been a licensed stock exchange company. It thus concluded that the contract of 29 July 2009 had breached public order, since it had aimed to take possession of property belonging to the municipality unlawfully, in breach of the established privatisation procedure.
C. Proceedings instituted by the applicant company against the Council
13. In October 2013 the applicant company lodged a claim against the Council to recover the amount it had paid to acquire company K.’s shares. It stated that it was suing the Council because, inter alia, in the proceedings instituted by the Deputy Prosecutor General, the courts, having invalidated the contract of 29 July 2009 (see paragraph 4 above), had not applied restitution in respect of the parties to that contract, and in particular had not ordered the amounts which company N. had paid to the Council to be returned to that company.
14. The courts rejected the claim, with a final decision being given by the HCCU on 20 May 2015. They found that: under the contract of 29 July 2009 the Council had received money from company N., and not from the applicant company; the applicant company had not been a party to that contract and therefore could not claim damages from the Council; the applicant company had concluded a contract with company N. and had paid money to it, therefore company N. had been responsible for the applicant company’s inability to become the owner of some of company K.’s shares; the fact that the courts, in the proceedings instituted by the Deputy Prosecutor General, had not applied restitution in respect of the parties to the contract of 29 July 2009 did not mean that the applicant company was released from lodging a claim for damages against company N.
15. In April 2014 the applicant company lodged another claim against the Council, seeking a court declaration in respect of its title to the shares it had bought from company N. It submitted that it had been a bona fide purchaser under the contract of 2 July 2010 (see paragraph 5 above), and that that contract had not been invalidated by courts.
16. The courts rejected the claim, with a final decision being given by the HCCU on 21 January 2015. With reference to the decisions of 20 October 2010, 18 January and 2 March 2011 (see paragraphs 8, 10 and 12 above), they found that since the contract of 29 July 2009 had been declared invalid ab initio, company N. had not been the owner of the shares in company K. which it had bought from the Council, and therefore had not been entitled to sell some of them to the applicant company under the contract of 2 July 2010; accordingly, no transfer to the applicant company of the property title to the disputed shares had taken place.
COMPLAINTS
17. The applicant company complains that as a result of the court proceedings instituted by the Deputy Prosecutor General against company N., it was deprived of the shares in company K. which it had bought from company N., without receiving compensation. It relies on Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 in this respect.
QUESTIONS TO THE PARTIES
1. Has there been an interference with the applicant company’s peaceful enjoyment of its possessions, within the meaning of Article 1 of Protocol No. 1 to the Convention, as a result of the proceedings instituted by the Deputy Prosecutor General against company N., which led to the restitution of the shares of company K., meanwhile acquired by the applicant company, to the Kyiv municipality? If so, was that interference in accordance with the conditions provided for by law, did it pursue a legitimate aim in the public interest, and did it impose a disproportionate and excessive burden on the applicant company (see, among many other authorities, Kryvenkyy v. Ukraine, no. 43768/07, § 42, 16 February 2017)?
2. Does any separate issue arise under Article 6 § 1 of the Convention as regards the above proceedings? If so, has there been a violation of that provision?
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