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FOURTH
SECTION
CASE OF IPTEH SA AND OTHERS v. MOLDOVA
(Application
no. 35367/08)
JUDGMENT
(merits)
STRASBOURG
24 November 2009
This judgment will become
final in the circumstances set out in Article 44 § 2
of the Convention. It may be subject to editorial revision.
In the case of Ipteh SA and Others
v. Moldova,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Nicolas Bratza, President,
Lech
Garlicki,
Giovanni Bonello,
Ljiljana
Mijović,
David Thór Björgvinsson,
Ledi
Bianku,
Mihai Poalelungi, judges,
and Fatoş
Aracı, Deputy
Section Registrar,
Having
deliberated in private on 3 November 2009,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 35367/08) against the Republic
of Moldova lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by Ipteh SA – a company incorporated in
Moldova, Worldway Limited – a company incorporated in the
United Kingdom, Kapital Invest SA – a company incorporated in
Romania and Ion Rusu – a Romanian national, on 25 July 2008.
- The
applicants were represented by Ms J. Hanganu, a lawyer practising in
Chişinău. The Moldovan Government (“the Government”)
were represented by their Agent, Mr V. Grosu.
- The
applicants alleged, in particular, that they had been the victims of
unfair civil proceedings and arbitrary deprivation of property.
- On
9 October 2008 the President of the Fourth Section decided to give
notice of the application to the Government. On the same date the
Romanian and the United Kingdom Governments were informed of their
right to intervene in the proceedings in accordance with Article 36 §
1 of the Convention and Rule 44
§ 1(b), but they did not communicate any wish to
avail themselves of this right. It was decided to examine the merits
of the application at the same time as its admissibility (Article 29
§ 3). It was also decided, under Rule 54 § 2 (c) of the
Rules of Court, to grant the case priority under Rule 41 of the same
Rules.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
first applicant, Ipteh SA, is a company incorporated in Moldova. The
other applicants are Worldway Limited (“the second applicant
company”) – a company incorporated in the United Kingdom
and holder of 35.29% of the shares of the first applicant; Kapital
Invest SA (“the third applicant company”) – a
company incorporated in Romania and holder of 49.63% of the shares of
the first applicant; and Ion Rusu (“the fourth applicant”)
– a Romanian national born in 1962, living in Iaşi and
holder of 11.72% of the shares of the first applicant company.
- At
the end of the 1990s, Ipteh SA and a third company, I., were owners
of a six-floor building located on the main boulevard of Chişinău
(“the building”). Both companies were State-owned and had
as their only asset different parts of the building.
- In
1999 the State decided to privatise the companies and sold their
shares to a private company, U.
- In
2000 and 2001 the new owner of the companies transferred all parts of
the building to the first applicant company.
- Also
in 2000 the former director of the first applicant company challenged
the privatisation in the courts. However, his action was dismissed by
a final judgment of the Economic Court of the Republic of Moldova of
11 July 2000, the courts having found that the privatisation had been
legal in all respects.
- In
July 2001 the fourth applicant bought 141,772 shares in the first
applicant company.
- In
August 2001 the second applicant company bought the rest of the
shares of the first applicant company.
- In
August 2006 the first applicant company issued 510,000 new shares and
sold them to the third applicant company.
- On
an unspecified date in 2002 the Prime Minister requested the
Prosecutor General's Office to conduct an investigation into the
lawfulness of the privatisation. On 17 February 2002 the Prosecutor
General informed the Prime Minister that he had verified the
lawfulness of the privatisation and had found it to be “in
strict compliance with the legislation in force”. The
Prosecutor General also informed the Prime Minister that the
lawfulness of the privatisation had been thoroughly verified during
the proceedings ending with the final judgment of 11 July 2000.
- On
an unspecified date in 2003 the President of Moldova requested the
Prosecutor General's Office to examine the possibility of challenging
the privatisation of 1999. In a letter of 26 June 2003 the Prosecutor
General informed President V. Voronin that the transaction had been
lawful and that there were no grounds to challenge it. Moreover, he
indicated that after the entry into force of the new Code of Civil
Procedure on 12 June 2003 it had become impossible to bring an appeal
in cassation against the final judgment of 11 July 2000.
- On
19 April 2007 the Prosecutor General's Office instituted proceedings
on behalf of the State in which it contested the lawfulness of the
1999 privatisation of the first applicant company and of company I.
on the ground that two Government regulations concerning the sale of
State- owned shares had been breached. In particular, the Prosecutor
argued that the size of the down payment made by company U. was
smaller than the one provided in the regulations and that the final
price offered for the shares had been too low. The Prosecutor relied
on Article 50 of the Civil Code as a legal basis for his action (see
paragraph 16 below). As a consequence of the alleged illegality of
the privatisation, the Prosecutor's Office also sought the annulment
of all the subsequent transfers and issues of shares as a result of
which the second, third and fourth applicants had become shareholders
of the first applicant company.
- The applicants opposed the action and argued, inter
alia, that it was time-barred and contrary to the principle of
legal certainty. They submitted that the provision of Article 86 of
the old Civil Code exonerating the Prosecutor from observing the
three-year time-limit when lodging actions in the interest of the
State was contrary to Article 6 of the Convention and made reference
to Dacia SRL v. Moldova (no. 3052/04, 18 March 2008). They
also submitted that the lawfulness of the privatisation had been
confirmed by a final judgment of 11 July 2000 with the power of res
judicata and that they were bona fide buyers who had been
discriminated against with respect to other companies which had
obtained State property in similar conditions and whose
privatisations had not been contested later by the State. They also
challenged the presiding judge on grounds of lack of impartiality and
argued that in the proceedings which had ended with the final
judgment of 11 July 2000 he had been successfully challenged on such
grounds. However, the challenge was dismissed.
- On
10 June 2008 the Chişinău Economic Court ruled in favour of
the Prosecutor General's Office in the absence of the third and
fourth applicants, who had not been summoned. The court dismissed the
applicants' objection concerning the existence of a final judgment of
11 July 2000. The court did not dispute the applicants' submission
that the proceedings of 2000 had had a similar subject matter;
however, it dismissed the objection on the ground that that judgment
had been adopted in proceedings in which the Prosecutor General's
Office had not been involved. The court also dismissed the
applicants' objection concerning the Statute of Limitations, arguing
that according to Article 86 of the Civil Code an action by the
Prosecutors in the interest of the State could not be time-barred.
- The
applicants appealed on the basis of the same arguments which were put
before the first-instance court. They also complained that not all of
them had had the possibility to take part in the proceedings and that
the judge had lacked impartiality.
- On
28 August 2008 the Supreme Court of Justice heard the applicants'
appeal. During the proceedings, the applicants challenged judge N.M.
from the panel and expressed doubts as to the manner in which the
President of the Supreme Court, Judge I.M., had composed the panel.
On the same day, the Supreme Court dismissed the appeal and upheld
the judgment of the first-instance court.
- The Supreme Court relied on provisions of the old
Civil Code in order to dismiss the applicants' objection concerning
their status as good faith buyers. In particular, the court argued
that according to the old Civil Code property obtained unlawfully
from the State could be claimed back irrespective of the fact that it
had been obtained by a bona fide buyer. However, when
examining the problem of the Statute of Limitations, the Supreme
Court agreed with the applicants' objection concerning Article 86 of
the old Civil Code (see paragraph 16 above). Nonetheless, the court
stated for the first time in the proceedings that since the
Prosecutor had introduced his action after the entry into force of
the new Civil Code, the rules concerning limitations in time
contained in that Code should apply. The Supreme Court expressed the
opinion that the Prosecutor's action concerned the declaration of the
absolute nullity of the privatisation and that therefore, in
accordance with the provisions of Article 217 of the new Civil Code,
it could not be limited in time. The Supreme Court also dismissed the
objection concerning the existence of a final judgment in respect of
the same problem on the same grounds as the first-instance court and
dismissed the objection concerning the non-participation of some of
the applicants in the proceedings.
- On
3 October 2008, the Government decided to privatise the building
again and an auction for the sale of the building was scheduled for
5 November 2008. It appears that the building was not sold on
that date and the Court has no information as to the subsequent
development of the events.
- It
does not appear from the facts of the case, as submitted by the
parties, that the applicants have been repaid the value of their
initial investment.
II. RELEVANT DOMESTIC LAW AND PRACTICE
- The
relevant provisions of the Civil Code, in force at the moment of the
privatisation, provide:
“Article 50. Nullity of contracts that are not
in conformity with the law
A contract which is contrary to the law shall be null
and void ...
When a contract is declared null and void, each party
must return to the other party everything received from it on the
basis of the contract ...
Article 74
The general limitation period for protection through a
court action of the rights of a [natural] person is three years; it
is one year for lawsuits between State organisations, collective
farms and any other social organisations.
Article 78
The competent court ... shall apply the limitation
period whether or not the parties request such application.
Article 83
Expiry of the limitation period prior to initiation of
court proceedings constitutes a ground for rejecting the claim.
If the competent court ... finds that the action has not
commenced within the limitation period for well-founded reasons, the
right in question shall be protected.
Article 86
The limitation period does not apply:
...
(2) to claims by State organisations
regarding restitution of State property found in the unlawful
possession of ... other organisations ... and of citizens;”.
- The relevant provisions of the new Civil Code, in
force after 12 June 2003, read as follows:
“Article 6. The action in time of the civil law
(1) The civil law does not have a retroactive
character. It cannot modify or suppress the conditions in which a
prior legal situation was constituted or the conditions in which such
a legal situation was extinguished. The new law cannot alter or
abolish the already created effects of a legal situation which has
extinguished or is in the process of execution.
Article 217. The absolute nullity of a legal act
(1) The absolute nullity of a legal act can
be invoked by any person having an interest. The court can invoke it
on its own motion...
(3) An action to declare the absolute nullity
is not limited in time.”
- In a judgment of 20 April 2005 (case nr. 2ra-563/05)
the Supreme Court of Justice dismissed the plaintiff's contentions
based on the provisions of the new Civil Code on the ground that the
facts of the case related to a period before the entry into force of
the new Civil Code and that, therefore, the provisions of the old
Civil Code were applicable.
THE LAW
- The
applicants complained that the proceedings were unfair, contrary to
Article 6 § 1 of the Convention, which in so far as relevant
provides:
“1. In the determination of his civil
rights and obligations ... everyone is entitled to a fair hearing ...
by a tribunal ....”
- The
applicants also complained that their rights as guaranteed under
Article 1 of Protocol No. 1 to the Convention had been violated as a
result of the outcome of the proceedings. Article 1 of Protocol No. 1
to the Convention provides:
“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.”
I. ADMISSIBILITY OF THE COMPLAINTS
- The
Court considers that the applicants' complaints raise questions of
fact and law which are sufficiently serious that their determination
should depend on an examination of the merits, and no other grounds
for declaring them inadmissible have been established. The Court
therefore declares the application admissible. In accordance with its
decision to apply Article 29 § 3 of the Convention (see
paragraph 4 above), the Court will immediately consider its merits.
II. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE
CONVENTION
- The
applicants submitted that the proceedings were unfair because the
domestic courts had failed to apply the Statute of Limitations in
accordance with the provisions of the old Civil Code. As a result,
the Prosecutor General was able to successfully challenge the
privatisation after almost eight years in disregard of the principle
enunciated in Article 6 of the new Civil Code (see paragraph 24
above). Moreover, the applicants stated that the case-law of the
Supreme Court of Justice was contradictory regarding the
interpretation and application of the Statute of Limitations.
- According
to the applicants, the principle of legal certainty was also breached
by the domestic courts because they failed to take into consideration
the fact that a similar challenge to the lawfulness of the
privatisation had already been dismissed by a final judgment of
11 July 2000. The applicants finally argued that the proceedings
had been unfair also because not all of the applicants had had the
possibility to participate in them and to defend their rights and
because the judges who examined the case had not been independent and
impartial.
- The
Government argued that according to Article 217 § 1 of the new
Civil Code, the absolute nullity of an act can be invoked by any
person without any limitation in time. According to them, the
absolute nullity of the privatisation was an essential premise for
the admission of the Prosecutor General's action and the upholding of
those actions after the expiry of the general time-limit did not
breach the principles of fairness guaranteed by Article 6 of the
Convention. The Government also rebutted the applicants' contention
about the lack of independence and impartiality of the judges
involved in the proceedings and that the courts should have paid
attention to the judgment of 11 July 2000.
- The
Court refers to its previous case-law in which it has stated that the
observance of admissibility requirements for carrying out procedural
acts is an important aspect of the right to a fair trial. The role
played by limitation periods is of major importance when interpreted
in the light of the Preamble to the Convention, which, in its
relevant part, declares the rule of law to be part of the common
heritage of the Contracting States (see Dacia SRL v. Moldova,
no. 3052/04, § 75, 18 March 2008).
- The
Court reiterates that it is not its task to take the place of the
domestic courts in interpreting domestic legislation. It is primarily
for the national authorities, notably the courts, to resolve problems
of interpretation. This applies in particular to the interpretation
by courts of rules of a procedural nature such as the prescribed
time-limit for instituting court actions. The Court's role is
confined to ascertaining whether the effects of such an
interpretation are compatible with the Convention in general and with
the principle of legal certainty, guaranteed by its Article 6, in
particular (see, mutatis mutandis, Platakou v. Greece,
no. 38460/97, § 37, ECHR 2001 I).
- In
the present case the Court notes that the time-limit for challenging
the privatisation of 1999 provided for by the Civil Code in force at
the material time expired in 2002. This was indirectly confirmed by
the Supreme Court of Justice, which accepted the applicants'
objection concerning Article 86 of the old Civil Code (see paragraph
20 above). Nevertheless, the Supreme Court of Justice chose not to
dismiss the Prosecutor General's action in accordance with the
provisions of the old Civil Code but to apply the provisions of the
new Civil Code, which entered into force in 2003, that is,
approximately one year after the expiry of the time-limit.
- The
Court does not contest the State's power to enact new legislation
regulating time-limits in civil proceedings. However, it does not
follow, as the Government argue, that it is compatible with the
Convention to apply those new rules in a manner which would unsettle
legal situations which have become final due to the application of
the limitation period before the enactment of such legislation. To
admit the contrary would amount to admitting that a State is free to
disregard a time-limit and challenge a final legal situation simply
by making use of its power to enact new legislation after the expiry
of the time-limit in question. The Court notes that the above
conclusion appears to be consistent with Article 6 of the new Civil
Code which states that the new Code cannot have retroactive effect
and cannot “modify or suppress the conditions in which a prior
legal situation was constituted or the conditions in which such a
legal situation was extinguished”.
- In the light of the above and having regard in
particular to the acceptance by the Supreme Court that there were no
compelling circumstances such as those foreseen in Article 86 of the
old Civil Code for displacing the three year limitation period, the
Court considers that there has been a violation of Article 6 § 1
of the Convention as a result of the upholding, in breach of the
principle of legal certainty, of the Prosecutor General's action for
the annulment of the privatisation. In the circumstances, the Court
does not consider it necessary to examine, additionally, whether
other aspects of the proceedings did or did not comply with that
provision.
III. ALLEGED VIOLATION OF ARTICLE 1 of protocol no. 1 to
THE CONVENTION
- The
applicants complained that the judgments by which the Prosecutor
General's action for annulment of the privatisation was upheld had
had the effect of infringing their right to peaceful enjoyment of
their possessions as secured by Article 1 of Protocol No. 1 to the
Convention. The Government disputed the applicants' contention and
argued that the privatisation of 1999 had been carried out with
serious breaches of the legislation and that, therefore, there has
been no breach of Article 1 of Protocol No. 1 to the Convention.
- The
Court considers that the applicants had a “possession”
for the purposes of Article 1 of Protocol No. 1. The Court found in
paragraph 36 above that the upholding of the Prosecutor General's
action after the expiry of the general time-limit, and in the absence
of any compelling reasons, was incompatible with the principle of
legal certainty. In such circumstances the Court cannot but find that
the upholding of the Prosecutor General's actions constituted an
unjustified interference with the applicants' right to property,
because a fair balance was not preserved and the applicants were
required to bear and continue to bear an individual and excessive
burden (see, mutatis mutandis, Brumărescu v. Romania
[GC], no. 28342/95, §§ 75-80, ECHR 1999 VII). As
in Dacia SRL (cited above), the domestic courts did not
provide any justification whatsoever for such interference. It
follows that there has been a violation of Article 1 of Protocol No.
1 to the Convention.
IV. APPLICATION OF ARTICLE 41 OF THE CONVENTION
- 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.”
- The
applicants submitted that since they had encountered difficulties in
obtaining all the necessary documents, they were unable to present
any observations concerning just satisfaction. Accordingly, they
asked the Court to reserve the question of just satisfaction.
- The
Court considers that the question of the application of Article 41
is not ready for decision. The question must accordingly be reserved
and the further procedure fixed with due regard to the possibility of
agreement being reached between the Moldovan Government and the
applicants.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Declares the application admissible;
- Holds that there has been a violation of Article
6 § 1 of the Convention on account of the breach of the
principle of legal certainty;
- Holds that there is no need to examine
separately the applicants' other complaints under Article 6 § 1
of the Convention;
- Holds that there has been a violation of Article
1 of Protocol No. 1 of the Convention;
- Holds that the question of the application of
Article 41 of the Convention is not ready for decision and
accordingly
(a) reserves
the said question;
(b) invites
the Moldovan Government and the applicants to submit, within the
forthcoming three months, their written observations on the matter
and, in particular, to notify the Court of any agreement they may
reach;
(c) reserves
the further procedure and delegates to the President of the Chamber
the power to fix the same if need be.
Done in English, and notified in writing on 24 November 2009,
pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Fatoş Aracı Nicolas Bratza
Deputy Registrar President